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dc.contributor.authorHerweg, Fabianen_US
dc.contributor.authorMüller, Danielen_US
dc.date.accessioned2008-12-10en_US
dc.date.accessioned2009-08-06T12:41:05Z-
dc.date.available2009-08-06T12:41:05Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/27177-
dc.description.abstractThis paper extends the standard principal-agent model with moral hazard to allow for agents having reference-dependent preferences according to Köszegi and Rabin (2006, 2007). The main finding is that loss aversion leads to fairly simple contracts. In particular, when shifting the focus from standard risk aversion to loss aversion, the optimal contract is a simple bonus contract, i.e. when the agent's performance exceeds a certain threshold he receives a fixed bonus payment. Moreover, if the agent is sufficiently loss averse, it is shown that the first-order approach is not necessarily valid. If this is the case the principal may be unable to fine-tune incentives. Strategic ignorance of information by the principal, however, allows to overcome these problems and may even reduce the cost of implementation.en_US
dc.language.isoengen_US
dc.publisherGraduate School of Economics Bonnen_US
dc.relation.ispartofseriesBonn econ discussion papers 2008,17en_US
dc.subject.jelD8en_US
dc.subject.jelM1en_US
dc.subject.jelM5en_US
dc.subject.ddc330en_US
dc.subject.keywordAgency Modelen_US
dc.subject.keywordMoral Hazarden_US
dc.subject.keywordReference-Dependent Preferencesen_US
dc.subject.keywordLoss Aversionen_US
dc.subject.stwArbeitsvertragen_US
dc.subject.stwVertragstheorieen_US
dc.subject.stwRisikoaversionen_US
dc.subject.stwAgency Theoryen_US
dc.subject.stwMoral Hazarden_US
dc.subject.stwPräferenztheorieen_US
dc.subject.stwTheorieen_US
dc.titleThe optimality of simple contracts : moral hazard and loss aversionen_US
dc.typeWorking Paperen_US
dc.identifier.ppn587688084en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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