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Repeated moral hazard and contracts with memory: A laboratory experiment

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  • Nieken, Petra
  • Schmitz, Patrick W.

Abstract

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals can benefit from offering long-term contracts that exhibit memory.

Suggested Citation

  • Nieken, Petra & Schmitz, Patrick W., 2012. "Repeated moral hazard and contracts with memory: A laboratory experiment," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 372, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    • Handle: RePEc:trf:wpaper:372
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    More about this item

    Keywords

    Repeated moral hazard; Sequential hidden actions; Laboratory experiment;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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