Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171095
Authors: 
Kwon, Suehyun
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6631
Abstract: 
This paper studies a contracting problem where agents’ cost of actions is private information. With two actions, this leads to a two-dimensional screening problem with moral hazard. There is a natural one-dimensional ordering of types when there is both adverse selection and moral hazard. Regardless of the number of types, an optimal menu of contracts either pools every type together or offers a menu of two contracts. Any incentive-compatible menu of contracts has to satisfy pairwise single-crossing properties in incentivized actions and ex-ante utilities. The principal can no longer sell the firm to the agent.
Subjects: 
adverse selection
moral hazard
multidimensional types
Document Type: 
Working Paper

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