Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/130476 
Year of Publication: 
2016
Series/Report no.: 
CESifo Working Paper No. 5851
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We analyze the optimal contract in static moral hazard situations, where the agent’s effort is not verifiable. We first present the main trade-offs of the principal-agent model. We cover the trade-off of incentives (motivation) vs. risk-sharing (efficiency), incentives vs. rents (when the agent is protected by limited liability), incentives to a task vs. incentives to another (in a multitask situation), and incentives to the agent vs. incentives to the principal (when both exert a non-verifiable effort). Then, we discuss two recent extensions: how incorporating behavioral biases in the analysis of incentives affects the predictions of the classical moral hazard model, and the insertion of the principal-agent problem in a matching market.
Subjects: 
moral hazard
behavioral approach
matching
JEL: 
D86
D03
C78
Document Type: 
Working Paper
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