Optimal incentives in a principal-agent model with endogenous technology

Artikel

One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper, we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher efficiency are also riskier. Using a modified version of the Holmstrom and Milgrom's framework, we obtain that lower agent's risk aversion unambiguously leads to higher incentives when the technology function linking efficiency and riskiness is elastic, while the risk aversion-incentive relationship can be positive when this function is rigid.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Games ; ISSN: 2073-4336 ; Volume: 9 ; Year: 2018 ; Issue: 1 ; Pages: 1-13 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Criteria for Decision-Making under Risk and Uncertainty ; Asymmetric and Private Information; Mechanism Design ; Economics of Contract: Theory ; Personnel Economics: Compensation and Compensation Methods and Their Effects ; Technological Change: Choices and Consequences; Diffusion Processes
• Subject: principal-agent ; incentives ; risk aversion ; endogenous technology

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Marini, Marco A. ; Polidori, Paolo ; Teobaldelli, Désirée ; Ticchi, Davide
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2018

Further information

• DOI: doi:10.3390/g9010006
• Handle: http://hdl.handle.net/10419/179167
• Last update: 10.03.2025, 11:44 AM CET