Renegotiating moral hazard contracts under limited liability and monotonicity

Authors
Matthews, SA
Citation
Sa. Matthews, Renegotiating moral hazard contracts under limited liability and monotonicity, J ECON THEO, 97(1), 2001, pp. 1-29
Citations number
20
Categorie Soggetti
Economics
Journal title
JOURNAL OF ECONOMIC THEORY
ISSN journal
00220531 → ACNP
Volume
97
Issue
1
Year of publication
2001
Pages
1 - 29
Database
ISI
SICI code
0022-0531(200103)97:1<1:RMHCUL>2.0.ZU;2-C
Abstract
In a principal-agent model H with unobservable effort and possible renegoti ation. contracts are assumed to satisfy two natural restrictions: limited l iability for the agent and monotonicity of payments for the principal, The main result is that if the agent has the renegotiation bargaining power, an y contract is weakly Pareto dominated by a debt contract. (C) 2001 Academic Press.