Bayesian Analysis of Linear Contracts

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Auteurs
Date

13 novembre 2022

Discipline
Type de document
Périmètre
Identifiant
  • 2211.06850
Source

arXiv - économie

Collection

arXiv

Organisation

Cornell University

Mots-clés Und

Computer Science - Computer Science and Game Theory Economics - Theoretical Economics

Sujets proches En

Contract law Contracts--Law and legislation Contractual limitations Limitations, Contractual Agreements

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Tal Alon et al., « Bayesian Analysis of Linear Contracts », arXiv - économie

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We provide a justification for the prevalence of linear (commission-based) contracts in practice under the Bayesian framework. We consider a hidden-action principal-agent model, in which actions require different amounts of effort, and the agent's cost per-unit-of-effort is private. We show that linear contracts are near-optimal whenever there is sufficient uncertainty in the principal-agent setting.

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