Multi-task agency with unawareness

Thadden, Ernst-Ludwig von ; Zhao, Xiaojian

Document Type: Working paper
Year of publication: 2012
The title of a journal, publication series: SSRN Working Paper Series
Volume: 2114055
Place of publication: Rochester, NY
Edition: Rev. 2013
Publication language: English
Institution: Außerfakultäre Einrichtungen > Graduate School of Economic and Social Sciences - CDSE (Economics)
School of Law and Economics > Microeconomics and Finance (von Thadden (2004-)
Subject: 330 Economics
Abstract: The paper introduces the problem of unawareness into multi-dimensional Principal-Agent theory. We introduce two key parameters to describe the problem, the extent and the effect of unawareness, show under what conditions it is optimal for the Principal to propose an incomplete or a complete contract, and characterize the incentive power of optimal linear contracts. If Agents differ in their unawareness, optimal incentive schemes can be distorted for both aware and unaware Agents, because, different from standard contract theory, the Single-Crossing Property fails to hold. In this case, even aware Agents can be subject to ineciently high or low incentives.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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