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http://hdl.handle.net/10419/33291
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| Title: | | Optimal incentive contracts under inequity aversion  |
| Authors: | | Englmaier, Florian Wambach, Achim |
| Issue Date: | | 2005 |
| Series/Report no.: | | IZA Discussion Papers 1643 |
| Abstract: | | We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a strong tendency towards linear sharing rules. Third, it delivers a simple rationale for team based incentives in many environments. Fourth, the Sufficient Statistics Result is violated. Dependent on the environment, optimal contracts may be either overdetermined or incomplete. |
| Subjects: | | contract theory linear contracts incentives sufficient statistics result inequity aversion incomplete contracts |
| JEL: | | D23 D63 J31 J33 M12 Z13 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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