Moral Hazard with Limited Liability: Incentive Contracting Under Monotone Ratio Assumptions

2011 ◽  
Author(s):  
Wenbin Wang ◽  
Shanshan Hu ◽  
Xinxin Hu
Keyword(s):  
Moral Hazard ◽  
Limited Liability ◽  
Incentive Contracting

Disclosure and Secrecy in Employee Monitoring

2010 ◽  
Vol 22 (1) ◽  
pp. 187-208
Author(s):  
Mitchell A. Farlee
Keyword(s):  
Risk Aversion ◽  
Moral Hazard ◽  
Monitoring System ◽  
Risk Premium ◽  
Risk Sharing ◽  
Limited Liability ◽  
Efficient Production ◽  
System A ◽  
Liability Risk ◽  
Employee Monitoring

ABSTRACT: Disclosure and monitoring policy are studied, where disclosure relates to information about the monitoring system. A moral hazard model is presented where employee monitoring occurs with some exogenous probability and the owner privately learns whether he will be monitoring before the employee chooses his productive action. Disclosure policy is an owner choice between revealing to the employee whether he will be monitoring before the action (Disclosure) or remaining silent (Secrecy). The results rely on the joint presence of risk aversion and limited liability. Risk aversion creates an efficiency/risk tradeoff where secrecy obtains risk-sharing benefits. Limited liability reduces these benefits, allowing preference for disclosure. Lower monitoring probabilities increase the risk premium required to obtain effort with secrecy. For small monitoring probabilities, disclosure is preferred even though less efficient production is achieved, because disclosure provides a greater risk-sharing benefit. For high monitoring probabilities, secrecy is preferred because it leads to greater efficiency despite a greater risk premium.

Distinguishing Limited Liability from Moral Hazard in a Model of Entrepreneurship

2006 ◽  
Vol 114 (1) ◽  
pp. 100-144 ◽  
Author(s):  
Anna L. Paulson ◽  
Robert M. Townsend ◽  
Alexander Karaivanov
Keyword(s):  
Moral Hazard ◽  
Limited Liability

scholarly journals The Cost of Moral Hazard and Limited Liability in the Principal-Agent Problem

2012 ◽  
Author(s):  
Felipe Balmaceda ◽  
Santiago Balseiro ◽  
José Rafael Correa ◽  
Nicolas E. Stier-Moses
Keyword(s):  
Moral Hazard ◽  
Limited Liability ◽  
Principal Agent ◽  
Principal Agent Problem ◽  
The Cost
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