Costly distortion of information in agency problems

Article Abstract:

Distortion of information transmitted to principals is a common characteristic of agency relationships. A model wherein costly information distortion emerges as equilibrium behavior is introduced. The focus is on an intermediate information structure between the cases of private and public information, thus the agent can falsify the privately observed state at a cost. Falsification can bring benefits despite the waste of resources since it helps reduce information rents. The manner of change of optimal contract and equilibrium payoffs as the information structure shifts from private to public information is investigated.

Business communication

---

Hierarchical decentralization of incentive contracts

Article Abstract:

The additional incentive problems inherent in the decentralization of incentive contracts, from agents in a hierarchy to agents at lower levels, can be resolved through sufficient monitoring of the agents' contribution to joint production, as well as a specific sequence of contracting. A delegation mechanism which involves a three-tier hierarchy that matches the expected profit for the principal under the optimal revelation mechanism is developed. Incentive problems are caused by delegation when agents who have been granted authority may pursue their own interests instead of that of the principal.

Delegation of authority, Decentralization (Management), Management contracts

---

Competition and incentives with nonexclusive contracts

Article Abstract:

Customers tend to deal for nonexclusive contracts in credit and insurance from free-market, multiple-risk companies when advantageous exclusive dealing contracts cannot be obtained. However, moral hazard factors are prompted whenever this decision to bargain is acted upon because there are shared efforts that are not contractible. In addition, nonexlusive credit or insurance contracts may require more allocations relative to exclusive contracts. As a result, when public competition is augmented, customer effort is forcibly reduced and private market rates increase.

Contract Administration, Models, Economic aspects, Contracts, Exclusive dealing agreements, Credit management, Contract management

Similar abstracts:

• Abstracts: Transparency of information and coordination in economies with investment complementarities. Returns to education: evidence from U.K. twins
• Abstracts: Welfare effects of financial innovation in incomplete markets economies with several consumption goods. Blackwell's ordering and public information
• Abstracts: Knowledge coordination, competence creation and integrated networks in globalised firms. Is national technology policy obsolete in a globalised world? The Japanese response
• Abstracts: The evolution of money as a medium of exchange. Perfect competition in the continuous assignment model. Evolution and market competition
• Abstracts: Wage negotiations under two-sided incomplete information with the possibility of side contracts. James Watt as intellectual monopolist: comment on Boldrin and Levine

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.