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Title:Moral hazard and ambiguity PDF Logo
Authors:Weinschenk, Philipp
Issue Date:2010
Series/Report no.:Preprints of the Max Planck Institute for Research on Collective Goods 2010,39
Abstract:We consider a principal-agent model with moral hazard where the agent's knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures. That is, the Informativeness Principle does not hold in our model. These results stand in stark contrast to the ones of the orthodox theory, but are empirically of high relevance.
Subjects:Moral Hazard
Ambiguity Aversion
Principal-Agent Model
Informativeness Principle
JEL:D82
M12
M52
Document Type:Working Paper
Appears in Collections:Preprints of the Max Planck Institute for Research on Collective Goods

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