Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/27177 
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dc.contributor.authorHerweg, Fabianen
dc.contributor.authorMüller, Danielen
dc.date.accessioned2008-12-10-
dc.date.accessioned2009-08-06T12:41:05Z-
dc.date.available2009-08-06T12:41:05Z-
dc.date.issued2008-
dc.identifier.urihttp://hdl.handle.net/10419/27177-
dc.description.abstractThis paper extends the standard principal-agent model with moral hazard to allow for agents having reference- dependent preferences according to Köszegi and Rabin (2006, 2007). The main finding is that loss aversion leads to fairly simple contracts. In particular, when shifting the focus from standard risk aversion to loss aversion, the optimal contract is a simple bonus contract, i.e. when the agent's performance exceeds a certain threshold he receives a fixed bonus payment. Moreover, if the agent is sufficiently loss averse, it is shown that the first-order approach is not necessarily valid. If this is the case the principal may be unable to fine-tune incentives. Strategic ignorance of information by the principal, however, allows to overcome these problems and may even reduce the cost of implementation.en
dc.language.isoengen
dc.publisher|aUniversity of Bonn, Bonn Graduate School of Economics (BGSE) |cBonnen
dc.relation.ispartofseries|aBonn Econ Discussion Papers |x17/2008en
dc.subject.jelD8en
dc.subject.jelM1en
dc.subject.jelM5en
dc.subject.ddc330en
dc.subject.keywordAgency Modelen
dc.subject.keywordMoral Hazarden
dc.subject.keywordReference-Dependent Preferencesen
dc.subject.keywordLoss Aversionen
dc.subject.stwArbeitsvertragen
dc.subject.stwVertragstheorieen
dc.subject.stwRisikoaversionen
dc.subject.stwAgency Theoryen
dc.subject.stwMoral Hazarden
dc.subject.stwPräferenztheorieen
dc.subject.stwTheorieen
dc.titleThe Optimality of Simple Contracts: Moral Hazard and Loss Aversion-
dc.type|aWorking Paperen
dc.identifier.ppn587688084en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:bonedp:172008-

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