at Google ScholarTitle data
Herweg, Fabian ; Müller, Daniel ; Weinschenk, Philipp:
Binary Payment Schemes : Moral Hazard and Loss Aversion.
In: American Economic Review.
Vol. 100
(2010)
Issue 5
.
- pp. 2451-2477.
ISSN 1944-7981
DOI: https://doi.org/10.1257/aer.100.5.2451
Abstract in another language
We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Kőszegi 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.
Further data
| Item Type: | Article in a journal |
|---|---|
| Refereed: | No |
| Subject classification: | JEL D82, D86, J41, M52, M12 |
| Institutions of the University: | Faculties > Faculty of Law, Business and Economics > Department of Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy > Chair Economics VIII: International Competition Policy - Univ.-Prof. Dr. Fabian Herweg Faculties Faculties > Faculty of Law, Business and Economics Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics VIII: International Competition Policy |
| Result of work at the UBT: | No |
| DDC Subjects: | 300 Social sciences > 330 Economics |
| Date Deposited: | 11 Feb 2015 08:32 |
| Last Modified: | 15 Jun 2023 08:09 |
| URI: | https://eref.uni-bayreuth.de/id/eprint/6667 |