Robust contracting with additive noise

• 成果类型: Article
• 署名作者: Carroll, Gabriel; Meng, Delong
• 署名单位: Stanford University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2016.10.002
• 发表日期: 2016
• 页码: 586-604
• 关键词: Linear contract; principal-agent problem; Robustness; Worst-case

摘要

We investigate the idea that linear contracts are reliable because they give the same incentives for effort at every point along the contract. We ask whether this reliability leads to a microfoundation for linear contracts, when the principal is profit-maximizing. We consider a principal-agent model with risk neutrality and limited liability, in which the agent observes the realization of a mean-zero shock to output before choosing how much effort to exert. We show that such a model can indeed provide a foundation for reliable contracts, and illustrate what elements are required. In particular, we must assume that the principal knows a lower bound, but not an upper bound, on the shocks. (C) 2016 Elsevier Inc. All rights reserved.