Optimal incentive contracts under inequity aversion
By: by Florian Englmaier, Achim Wambach.
Contributors: Wambach, Achim.
Series: Discussion paper ;; no. 1643; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) ;; no. 1643
Publisher: IZA
Published: 2005
Place of publication: Bonn, Germany
Language: eng
Format: Electronic resource
Subjects: Contracts -- Mathematical models.
Description: "We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a strong tendency towards linear sharing rules. Third, it delivers a simple rationale for team based incentives in many environments. Fourth, the Sufficient Statistics Result is violated. Dependent on the environment, optimal contracts may be either overdetermined or incomplete"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/26/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.