Dual Moral Hazard and the Tyranny of Success

• 成果类型: Article
• 署名作者: Ide, Enrique
• 署名单位: University of Navarra; IESE Business School
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MICROECONOMICS
• ISSN/ISSBN: 1945-7669
• DOI: 10.1257/mic.20220344
• 发表日期: 2024
• 页码: 154-191
• 关键词: disk-drive industry; hold-up; INNOVATION; CONTRACTS; incentives; FIRMS; RENEGOTIATION; persistence; size

摘要

I explain why current success can undermine an organization's ability to innovate. I consider a standard bandit problem between a safe and a risky arm with two modifications. First, a principal allocates resources. Second, an agent must install the risky arm, which is not contractible. If the principal cannot commit to a resource policy, a dual moral hazard problem emerges: The agent's pay must be tied to the risky arm's success to encourage installation, inducing the principal to stop experimenting with the arm prematurely. This problem intensifies as the safe arm becomes more profitable, potentially leaving the organization worse off. ( JEL D21, D82, D86, O31)