Moral hazard in teams with limited punishments and multiple outputs

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dc.contributor.author Quintero Jaramillo, Jose E.
dc.date.accessioned 2006-11-07T11:13:57Z
dc.date.available 2006-11-07T11:13:57Z
dc.date.issued 2004-01
dc.identifier.uri http://hdl.handle.net/10016/93
dc.description.abstract This paper studies incentive provision with limited punishments. It revisits the moral hazard problem with risk neutral parties and solves for optimal compensation schemes in situations where agents' participation is implied by a limited liability constraint. Providing minimum cost incentives to teams or individuals requires awarding high bonuses only when extreme performances are observed. Even when the first-best is attainable, the principal may prefer to induce more (or less) effort than it is sociably desirable because she only cares about the marginal cost of motivation. With positive production externalities joint bonuses are optimal. With limited liability on the principal's side, the optimal scheme becomes a tournament-even in the absence of externalities. The paper also looks at conditions that favor one incentive scheme over another when agents adapt their strategies as information becomes available.
dc.format.extent 704305 bytes
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Workings Paper. Bussiness Economics
dc.relation.ispartofseries 2004-05
dc.title Moral hazard in teams with limited punishments and multiple outputs
dc.type workingPaper
dc.subject.eciencia Empresa
dc.rights.accessRights openAccess
dc.identifier.repec wb040705
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