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- handle: 10670/1.2dlzcy
- hal: hal-04224372
- doi: 10.1016/j.jet.2023.105621
- WOS: 000949807600001
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.jet.2023.105621
Mots-clés
Moral hazard Limited liability Contract theory D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D82 - Asymmetric and Private Information • Mechanism Design D - Microeconomics/D.D8 - Information, Knowledge, and Uncertainty/D.D8.D86 - Economics of Contract: TheorySujets proches
Applied science Arts, Useful Useful arts Science, AppliedCiter ce document
Daniel F. Garrett et al., « Optimal technology design », HAL-SHS : économie et finance, ID : 10.1016/j.jet.2023.105621
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Résumé
This paper considers a moral hazard model with agent limited liability. Prior to interacting with the principal, the agent designs the production technology, which is a specification of his cost of generating each output distribution. After observing the production technology, the principal offers a payment scheme and then the agent chooses a distribution over outputs. We show that there is an optimal design involving only binary distributions (i.e., the cost of any other distribution is prohibitively high), and we characterize the equilibrium technology defined on the binary distributions. Notably, the equilibrium payoff of both players is 1/e.