Minimum payments and induced effort in moral hazard problems

• 成果类型: Article
• 署名作者: Kadan, Ohad; Swinkels, Jeroen M.
• 署名单位: Washington University (WUSTL); Saint Louis University; Northwestern University
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2013.08.004
• 发表日期: 2013
• 页码: 468-489
• 关键词: Minimum payments; moral hazard; Induced effort; PRODUCTIVITY; incentives

摘要

Consider a moral hazard problem in which there is a constraint to pay the agent no less than some amount m. This paper studies the effect of changes in m on the effort that the principal chooses to induce from the agent. We present sufficient conditions on the informativeness of the signal observed by the principal and on the agent's utility under which when m increases, induced effort (and hence productivity) falls. We also study how the cost minimizing contract for any given effort level varies in m. We present an efficient algorithm for numerically calculating optimal contracts for given parameters and show that induced effort falls when m is increased in many cases even when our sufficient conditions fail. (C) 2013 Elsevier Inc. All rights reserved.