Arbeitspapier
Optimal Incentives without Expected Utility
This paper investigates the optimal design of incentives when agents distort probabilities. We show that the type of probability distortion displayed by the agent and its degree determine whether an incentivecompatible contract can be implemented, the strength of the incentives included in the optimal contract, and the location of incentives on the output space. Our framework demonstrates that incorporating descriptively-valid theories of risk in a principal-agent setting leads to incentive contracts that are typically observed in practice such as salaries, lump-sum bonuses, and high-performance commissions.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. TI 2022-090/I
- Classification
-
Wirtschaft
Asymmetric and Private Information; Mechanism Design
Economics of Contract: Theory
Labor Contracts
Personnel Economics: Compensation and Compensation Methods and Their Effects
Personnel Management; Executives; Executive Compensation
- Subject
-
Contracts
Probability Weighting
Incentives
Mechanism Design
Rank-Dependent Utility.
- Event
-
Geistige Schöpfung
- (who)
-
González-Jiménez, Víctor
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2022
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- González-Jiménez, Víctor
- Tinbergen Institute
Time of origin
- 2022
Other Objects (12)
Loss Modification Incentives for Insurers under Expected Utility and Loss Aversion
Expected Utility and Catastrophic Risk
Degree Centrality, von Neumann-Morgenstern Expected Utility and Externalities in Networks
Control without Deception
Separating Real Incentives and Accountability
Weighted Temporal Utility
Gift-Exchange, Incentives, and Heterogeneous Workers
Liquidity Creation without Banks
Peer Evaluation: Incentives and Co-Worker Relations
Social Relations, Incentives, and Gender in the Workplace
On Esteem-Based Incentives
Subjective expected utility theory without states of the world
Loss Modification Incentives for Insurers under Expected Utility and Loss Aversion
Expected Utility and Catastrophic Risk
Degree Centrality, von Neumann-Morgenstern Expected Utility and Externalities in Networks
Control without Deception
Separating Real Incentives and Accountability
Weighted Temporal Utility
Gift-Exchange, Incentives, and Heterogeneous Workers
Liquidity Creation without Banks
Peer Evaluation: Incentives and Co-Worker Relations
Social Relations, Incentives, and Gender in the Workplace
On Esteem-Based Incentives
Subjective expected utility theory without states of the world
Loss Modification Incentives for Insurers under Expected Utility and Loss Aversion
Expected Utility and Catastrophic Risk
Degree Centrality, von Neumann-Morgenstern Expected Utility and Externalities in Networks
Control without Deception
Separating Real Incentives and Accountability
Weighted Temporal Utility
Gift-Exchange, Incentives, and Heterogeneous Workers
Liquidity Creation without Banks
Peer Evaluation: Incentives and Co-Worker Relations
Social Relations, Incentives, and Gender in the Workplace
On Esteem-Based Incentives