The value of information in a principal–agent model with moral hazard: The ex post contracting case

2012 ◽  
Vol 74 (1) ◽  
pp. 352-365 ◽  
Author(s):  
Randy Silvers
Keyword(s):  
Moral Hazard ◽  
Value Of Information ◽  
Principal Agent ◽  
Agent Model ◽  
Ex Post ◽  
Principal Agent Model

Agency, Information, and the Structure of Moral Problems in Business

2006 ◽  
Vol 28 (2) ◽  
pp. 177-195 ◽  
Author(s):  
Bryan W. Husted
Keyword(s):  
Asymmetric Information ◽  
Moral Hazard ◽  
Information Asymmetry ◽  
Adverse Selection ◽  
Information Economics ◽  
Principal Agent ◽  
Ethical Problems ◽  
Agent Model ◽  
Moral Problems ◽  
Principal Agent Model

Many ethical problems in business can be characterized as having elements of incomplete and/or asymmetric information. This paper analyzes such problems using information economics and the principal-agent model. It defines the nature of moral problems in business and then applies principal-agent models involving adverse selection and moral hazard to these problems. Possible solutions to conditions of information asymmetry are examined in order to support the development of organizational virtue.

Double-sided moral hazard, information screening and the optimal contract

2016 ◽  
Vol 6 (4) ◽  
pp. 404-431 ◽  
Author(s):  
Jin Xue ◽  
Yiwen Fei
Keyword(s):  
Venture Capital ◽  
Moral Hazard ◽  
Capital Investment ◽  
Principal Agent ◽  
Optimal Contract ◽  
Fixed Income ◽  
Content Type ◽  
Agent Model ◽  
Venture Capital Investment ◽  
Principal Agent Model

Purpose In the practice of venture capital investment, the venture capital will not only claim the share of the enterprise’s future output, but also a certain amount of fixed income. The purpose of this paper is to examine the optimal contract which blends the variable ownership income and the fixed income theoretically so as to provide a keen insight into the venture capital practice. Design/methodology/approach This paper establishes an extended principal-agent model and researches on the design of optimal contract dominated by venture capital with double-sided moral hazard and information screening. Findings By establishing theoretical models, the main findings are: first, high-quality enterprise tends to relinquish less ownership but give more fixed return to the venture capital as compensation in order to obtain the venture capital financing; second, low-quality enterprise is willing to relinquish more ownership but give less fixed return to the venture capital for financing; third, due to the existence of double-sided moral hazard, neither of the venture capital and the enterprise will exert their best effort. Originality/value This paper furthers the application of principal-agent model in the field of venture capital investment and researches on the optimal contract, considering double-sided moral hazard and adverse selection at the same time originally.

scholarly journals Asymmetric awareness and heterogeneous agents

2020 ◽  
Vol 32 (4) ◽  
pp. 461-484
Author(s):  
Antoine Dubus
Keyword(s):  
Moral Hazard ◽  
Heterogeneous Agents ◽  
Contract Design ◽  
The Other ◽  
Principal Agent ◽  
Optimal Contract ◽  
Jel Codes ◽  
Agent Model ◽  
Principal Agent Model

We consider a principal-agent model with moral-hazard and asymmetric awareness and show how the heterogeneity of agents on their aversion to effort affects contract design. We discuss the optimal contract adopted when a principal is aware of all the impacts of an agent’s action, while agents ignore some of them. When a principal faces two types of agents, where one type is more effort-averse than the other, the equilibrium contract is shaped by agent proportions: it pools the agents, separates them, or excludes the more effort-averse agents from the contract. When efforts are observable, all the agents remain unaware, while when efforts are hidden, a principal increases the awareness of the agents to a level commensurate with the nature of the contract. JEL Codes – D82; D83; D86

scholarly journals Binary Payment Schemes: Moral Hazard and Loss Aversion

2010 ◽  
Vol 100 (5) ◽  
pp. 2451-2477 ◽  
Author(s):  
Fabian Herweg ◽  
Daniel Müller ◽  
Philipp Weinschenk
Keyword(s):  
Moral Hazard ◽  
Expected Utility ◽  
Loss Aversion ◽  
Reference Point ◽  
Performance Measure ◽  
Principal Agent ◽  
Optimal Contract ◽  
Agent Model ◽  
Payment Schemes ◽  
Principal Agent Model

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Kőoszegi 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)

Research on the Value of Traceable Information Sharing

2014 ◽  
Vol 644-650 ◽  
pp. 5489-5493 ◽  
Author(s):  
Na Zhang ◽  
Shou Wen Ji ◽  
Zhe Yuan
Keyword(s):  
Supply Chain ◽  
Information Sharing ◽  
Pareto Optimality ◽  
Value Of Information ◽  
Evaluation System ◽  
Practical Significance ◽  
Principal Agent ◽  
Agent Model ◽  
Principal Agent Model

This paper first analyzes the problems of traceable information sharing between dairy suppliers and manufacturers, and proposes the theoretical and practical significance of building related evaluation system of information sharing. And then the traceable information in dairy supply chain based on batch management is analyzed and a principal-agent model is developed to assess the value of information sharing between dairy suppliers and manufacturers. Results show that when the information sharing between dairy suppliers and manufacturers reaches a certain degree, the Pareto optimality of the overall supply chain can be achieved.

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