Journal
GAMES AND ECONOMIC BEHAVIOR
Volume 69, Issue 2, Pages 312-328Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.geb.2009.12.007
Keywords
Contract theory; Linear contracts; Incentives; Sufficient statistics result; Inequity aversion; Incomplete contracts
Categories
Ask authors/readers for more resources
We analyze the classic moral hazard problem with the additional assumption that agents are inequity averse. The presence of inequity aversion alters the structure of optimal contracts. When the concern for equity becomes more important, there is convergence towards linear sharing rules. The sufficient statistics result is violated. Depending on the environment, contracts may be either overdetermined, i.e. include non-informative performance measures, or incomplete, i.e. neglect informative performance measures. Finally, our model delivers a simple rationale for team based incentives, implying wage compression. (C) 2010 Elsevier Inc. All rights reserved.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available