Endogenous verifiability and optimality in agency

• 成果类型: Article
• 署名作者: Ishiguro, S
• 署名单位: Ritsumeikan University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1006/jeth.2001.2873
• 发表日期: 2002
• 页码: 518-530
• 关键词: endogenous verifiability; expectation damages; penalty doctrine

摘要

This paper investigates the optimal contract design in a principal agent model where verification of an agent's action is endogenously determined through strategic interactions between contracting parties. We derive a necessary and sufficient condition for the first best outcome to be implemented as an equilibrium, The equilibrium has the following features (i) The action level that the agent chooses is not verified even if it is possible. (ii) Nevertheless. the first best can be attained by making a contract contingent on the unverified action. (C) 2001 Elsevier Science (USA).