Flexible contracts

• 成果类型: Article
• 署名作者: Gottardi, Piero; Talton, Jean Marc; Ghirardato, Paolo
• 署名单位: European University Institute; Universita Ca Foscari Venezia; Centre National de la Recherche Scientifique (CNRS); Paris School of Economics; University of Turin
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2016.01.013
• 发表日期: 2017
• 页码: 145-167
• 关键词: delegation; flexibility; AGENCY COSTS; multiple priors; imprecision aversion

摘要

This paper studies the costs and benefits of delegating decisions to superiorly informed agents, that is of adopting flexible contracts, relative to the use of rigid, non-discretionary contracts. The main focus of the paper lies in the analysis of the costs of delegation, primarily agency costs, versus their benefits, primarily the flexibility of the action choice in two different environments, one with risk and one with ambiguity. We first determine and characterize the properties of the optimal flexible contract. We then show that the higher the agent's degree of risk aversion, the higher is the agency costs of delegation and the less profitable a flexible contract relative to a rigid one. When the parties have imprecise probabilistic beliefs, the agent's degree of imprecision aversion introduces another agency cost, which again reduces the relative profitability of flexible contracts. (C) 2016 Elsevier Inc. All rights reserved.