Binary Payment Schemes: Moral Hazard and Loss Aversion

• 成果类型: Article
• 署名作者: Herweg, Fabian; Mueller, Daniel; Weinschenk, Philipp
• 署名单位: University of Bonn; University of Bonn; Max Planck Society
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.100.5.2451
• 发表日期: 2010
• 页码: 2451-2477
• 关键词: limited-liability; decision-making; prospect-theory; disappointment; CHOICE; RISK; INFORMATION; EFFICIENCY

摘要

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Koszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully contingent contract. The logic is that, due to the stochastic reference point, increasing the number of different wages reduces the agent's expected utility without providing strong additional incentives. Moreover, for diminutive occurrence probabilities for all signals the agent is rewarded with the fixed bonus if his performance exceeds a certain threshold. (JEL D82, D86, J41, M52, M12)