IDEAS home Printed from https://ideas.repec.org/p/qed/wpaper/1212.html
   My bibliography  Save this paper

Bait Contracts

Author

Listed:
  • Marie-Louise Vierø

    (Queen's University)

Abstract

This paper explores contracting in the presence of ambiguity. It revisits Holmstrom's sufficient statistic result of when to condition a contract on an outside signal. It is shown that if the signal is ambiguous, in the sense that its probability distribution is unknown, then Holmstrom's result can be overturned. Specifically, uninformative ambiguous signals can be valuable.

Suggested Citation

  • Marie-Louise Vierø, 2009. "Bait Contracts," Working Paper 1212, Economics Department, Queen's University.
  • Handle: RePEc:qed:wpaper:1212
    as

    Download full text from publisher

    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/wpaper/qed_wp_1212.pdf
    File Function: First version 2009
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    contracts; ambiguity; optimism; incentives; signals; stock options;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:1212. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Babcock (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.