Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/37476 
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Asymmetric Information and Incentives No. A8-V1
Publisher: 
Verein für Socialpolitik, Frankfurt a. M.
Abstract: 
We investigate a moral hazard model with a one-sided commitment problem. That is, after effort provision, the agent is free to either stay with the principal or to leave and pursue his (ex-post) outside option, the value of which is increasing in effort. Depending on parameters, optimal contracts have interesting properties, such as first-best effort incentives, nonresponsiveness to underlying parameters, or inefficient separation. Moreover, the agent might suffer from a ceteris paribus improvement of his outside option. Potential applications of this framework include employment relationships and venture capital financing.
Subjects: 
moral hazard
limited commitment
ex-post outside option
limited liability
JEL: 
D82
K31
M52
Document Type: 
Conference Paper

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