Unraveling in a repeated moral hazard model with multiple agents

Artikel

This paper studies an infinite horizon repeated moral hazard problem where a single principal employs several agents. We assume that the principal cannot observe the agents' effort choices; however, agents can observe each other and can be contractually required to make observation reports to the principal. Observation reports, if truthful, can serve as a monitoring instrument to discipline the agents. However, reports are cheap talk so that it is also possible for agents to collude, i.e. where they shirk, earn rents, and report otherwise to the principal. The main result of the paper constructs a class of collusion-proof contracts with two properties. First, equilibrium payoffs to both the principal and the agents approach their first-best benchmarks as the discount factor tends to unity. These payoff bounds apply to all subgame perfect equilibria in the game induced by the contract. Second, while equilibria themselves depend on the discount factor, the contract which induces these equilibria is independent of the discount factor.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Journal: Theoretical Economics ; ISSN: 1555-7561 ; Volume: 10 ; Year: 2015 ; Issue: 1 ; Pages: 11-49 ; New Haven, CT: The Econometric Society

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Noncooperative Games ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Economics of Contract: Theory
• Thema: Repeated games ; principal-agent model ; collusion ; statistical testing

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Chandrasekher, Madhav
• Ereignis: Veröffentlichung
• (wer): The Econometric Society
• (wo): New Haven, CT
• (wann): 2015

Weitere Informationen

• DOI: doi:10.3982/TE833
• Handle: http://hdl.handle.net/10419/150242
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ