Dynamic contractual incentives in the face of a Samaritans’s dilemma
| Autor: | Josepa Miquel-Florensa |
|---|---|
| Rok vydání: | 2012 |
| Předmět: |
Finance
business.industry Moral hazard media_common.quotation_subject General Social Sciences General Decision Sciences Commit Payment Computer Science Applications Microeconomics Dilemma Incentive Arts and Humanities (miscellaneous) Incentive compatibility Developmental and Educational Psychology Economics Investment cost business General Economics Econometrics and Finance Applied Psychology Valuation (finance) media_common |
| Zdroj: | Theory and Decision. 74:151-166 |
| ISSN: | 1573-7187 0040-5833 |
| Popis: | We design a project funding contract that provides optimal incentives to agents, in a setting where both principal and agent enjoy the benefits of the project in a non-rival form once completed but may differ in their valuation. To do so, we study optimal incentive payments in a dynamic principal-agent framework in which the principal cannot observe the agent’s investment, but only completed projects, and faces a Samaritan’s Dilemma: he cannot commit to terminate the contract before completion of the project. The agent decides whether to undertake a (discrete) investment or consume all received funds. We find that the optimal contract is stationary, and that either transfers equal to investment cost are incentive compatible or the cost of the contract is decreasing with the agent’s valuation of the projects. Given the intrinsic valuation of the project by the agent, he is always better off signing the contract in contraposition with the general moral hazard result. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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