Private Contracts and Efficiency: An Example
We give an example to show that efficiency in the principal-agent organization depends on the public information nature of the wage contracts. When wage contracts are private, the principal may have a moral hazard problem in deviating from some of the contracts, and efficiency need not hold even when all players are risk-neutral.
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|Date of creation:||Aug 2004|
|Date of revision:|
|Contact details of provider:|| Postal: Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501|
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