scholarly journals Optimal Contract Under Moral Hazard with Soft Information

2012 ◽  
Author(s):  
Guillaume Roger
2013 ◽  
Vol 5 (4) ◽  
pp. 55-80 ◽  
Author(s):  
Guillaume Roger

I study a model of moral hazard with soft information: the agent alone observes the stochastic outcome of her action; hence the principal faces a problem of ex post adverse selection. With limited instruments the principal cannot solve these two problems independently; the ex post incentive for misreporting interacts with the ex ante incentives for effort. This affects the shape and properties of the optimal contract, which fails to elicit truthful revelation in all states. In this setup audit and transfer become strategic complements; this is rooted in the nonseparability of the problem. (JEL D82, D86)


2019 ◽  
Author(s):  
Shenzhe Jiang ◽  
Yuzhe Zhang

Abstract This paper studies the optimal design of the Pacific Salmon Treaty, which was signed by the U.S. and Canada in 1999 to share salmon on the Pacific coast. Moral hazard exists because countries may steal from each other. If a country’s observed output is suspiciously too high, the treaty either reduces the country’s future share, or asks the country to make a monetary transfer to its opponent. A calibrated version of our model shows that it is optimal for the U.S. to pay Canada $328.93 million every 30.78 years. Switching to the optimal contract improves the total welfare by 1.55%.


Stochastics ◽  
2017 ◽  
Vol 89 (6-7) ◽  
pp. 1015-1038 ◽  
Author(s):  
Ishak Hajjej ◽  
Caroline Hillairet ◽  
Mohamed Mnif ◽  
Monique Pontier

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