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Private Contracts and Efficiency: An Example


  • Harrison Cheng

    () (Department of Economics, University of Southern Calfornia)

  • Haruo Imai

    (Institute of Economic Research, Kyoto University)


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.

Suggested Citation

  • Harrison Cheng & Haruo Imai, 2004. "Private Contracts and Efficiency: An Example," KIER Working Papers 596, Kyoto University, Institute of Economic Research.
  • Handle: RePEc:kyo:wpaper:596

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty


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