Double-Sided Moral Hazard, Efficiency Wages and Litigation

Arbeitspapier

We consider a double-sided moral hazard problem where each party can renege on the signed contract since there does not exist any verifiable performance signal. It is shown that ex-post litigation can restore incentives of the agent. Moreover, when the litigation can be settled by the parties the pure threat of using the legal system may suffice to make the principal implement first-best effort. As is shown in the paper, this finding is rather robust. In particular, it holds for situations where the agent is protected by limited liability, where the parties have different technologies in the litigation contest, or where the agent is risk averse.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SFB/TR 15 Discussion Paper ; No. 214

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Economics of Contract: Theory ; Compensation Packages; Payment Methods ; Litigation Process
• Thema: double-sided moral hazard ; efficiency wage ; litigation ; contest ; settlement

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Gürtler, Oliver ; Kräkel, Matthias
• Ereignis: Veröffentlichung
• (wer): Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
• (wo): München
• (wann): 2007

Weitere Informationen

• DOI: doi:10.5282/ubm/epub.13338
• Handle: http://hdl.handle.net/10419/94007
• URN: urn:nbn:de:bvb:19-epub-13338-7
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ