Describability and Agency Problems
This paper suggests a reason, other than asymmetric information, why agency contracts are not explicitly contingent on the agent's performance or actions. Two ingredients are essential to this reason. The first is the written form that contracts are required to take to be enforceable. The second is a form of discontinuity in the parties' preferences and in the technology that transforms actions into a (probabilistic) outcome. We show that under these conditions the chosen contract may not be explicitly contigent on the agent's action although, in principle, such actions are contractible and observable to all parties to the contract, court included.
|Date of creation:||15 Nov 1995|
|Date of revision:||20 Sep 1996|
|Note:||Type of Document - LaTeX; prepared on IBM PC ; to print on PostScript 600DPI; pages: 32; figures: included|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Matthews, Steven A, 1995.
"Renegotiation of Sales Contracts,"
Econometric Society, vol. 63(3), pages 567-89, May.
- Hardman Moore, John & Hart, Oliver, 1985.
"Incomplete Contracts and Renegotiation,"
CEPR Discussion Papers
60, C.E.P.R. Discussion Papers.
- Grossman, Sanford J & Hart, Oliver, 1985.
"The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
CEPR Discussion Papers
70, C.E.P.R. Discussion Papers.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J. & Hart, Oliver D., 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Scholarly Articles 3450060, Harvard University Department of Economics.
- Sanford Grossman & Oliver Hart, .
"An Analysis of the Principal-Agent Problem,"
Rodney L. White Center for Financial Research Working Papers
15-80, Wharton School Rodney L. White Center for Financial Research.
- Hart, Oliver D. & Moore, John, 1990.
"Property Rights and the Nature of the Firm,"
3448675, Harvard University Department of Economics.
- Anderlini, Luca & Felli, Leonardo, 1994.
"Incomplete Written Contracts: Undescribable States of Nature,"
The Quarterly Journal of Economics,
MIT Press, vol. 109(4), pages 1085-1124, November.
- Anderlini, L. & Felli, L., 1993. "Incomplete Written Contracts: Undescribable States of Nature," Papers 183, Cambridge - Risk, Information & Quantity Signals.
- Anderlini, L. & Felli, L., 1995. "Endogenous Agency Problems," Papers 200, Cambridge - Risk, Information & Quantity Signals.
- Luca Anderlini & Leonardo Felli, 1993. "Incomplete Written Contracts: Endogenous Agency Problems (Revised version, 'Describability and Agency Problems', published in European Economic Review, vol.42 (1998), pp.35-59.)," STICERD - Theoretical Economics Paper Series /1993/267, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpga:9511001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.