Moral Hazard and Clear Conscience

Arbeitspapier

The paper studies theoretically how the optimal contract in the hidden-action moral hazard model is affected when an agent feels bad when not reaching a target effort set in the contract. While the presence of guilt brings the outcome closer to first-best, an effort target is not costless for the principal. In equilibrium, the agent's effort falls short of the target, inducing guilt which must be compensated by a higher financial reward. Thus, although the principal's payoff is higher, the agent receives a part of the monetary rents accruing to intrinsic motivation. This result differs markedly from previous contributions on contracting under social preference or pro-social motivation.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SITE Working Paper ; No. 4

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Noncooperative Games ; Asymmetric and Private Information; Mechanism Design ; Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
• Thema: Moral Hazard ; Norms ; Agency ; Social Preferences ; Guilt ; Work Ethic

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Miettinen, Topi
• Ereignis: Veröffentlichung
• (wer): Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE)
• (wo): Stockholm
• (wann): 2009

Weitere Informationen

• Handle: http://hdl.handle.net/10419/204715
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ