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329-1.pdf

🔗 Source: rationality-and-competition.de

📊 Size: 570 KB

👤 Author: Lang

⬇️ Downloads: 153

Summary

Previous literature shows that contracts without third-party payments fail to incentivize employees, and that deterministic contracts require payments to third parties. However, the author argues that stochastic contracts, which use stochastic compensation, can optimally incentivize employees without third-party payments. The intuition is that differences in risk preferences between the principal and the agent enable contracts to implement different utilities without relying on third parties. Stochastic contracts can also be more efficient, renegotiation-proof, and make the principal better off compared to deterministic contracts.

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Description

Previous literature shows that contracts without third-party payments fail to incentivize employees, and that deterministic contracts require payments to third...

Technical Information

File Format: PDF
File Size: 570 KB
Pages: 39
Language: EN
Author: Lang
Total Downloads: 153
Last Updated: 7 hours ago

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