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http://hdl.handle.net/10419/25168
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| Title: | | Relational contracts and inequity aversion  |
| Authors: | | Kragl, Jenny Schmid, Julia |
| Issue Date: | | 2006 |
| Series/Report no.: | | SFB 649 discussion paper 2006,085 |
| Abstract: | | We study the effects of envy on the feasibility of relational contracts in a standard moral hazard setup with two agents. Performance is evaluated via an observable, but non-contractible signal which reflects the agent's individual contribution to firm value. Both agents exhibit disadvantageous inequity aversion. In contrast to the literature, we find that inequity aversion may be beneficial: In the presence of envy, for a certain range of interest rates relational contracts may be more profitable. Furthermore, for some interest rates reputational equilibria exist only with inequity averse agents. |
| Subjects: | | principal-agent relational contract inequity aversion envy |
| JEL: | | D63 D82 M52 M54 |
| Document Type: | | Working Paper |
| Appears in Collections: | | SFB 649 Discussion Papers, HU Berlin
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