Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67434
Authors: 
Davis, Jerome
Keiding, Hans
Year of Publication: 
2008
Citation: 
[Journal:] The Open Economics Journal [ISSN:] 1874-9194 [Publisher:] Bentham Open [Place:] Sharjah [Volume:] 1 [Year:] 2008 [Pages:] 47-54
Abstract: 
A contract where the agent is compensated ex post only upon satisfactory performance, often called a no-cureno-pay contract, can arise as under several circumstances. In this paper, we model the problem of contractual choice as a principal-agent contract which is modified due to hidden information about the competence of the agent to fulfill the obligations of the contract. The agent offers a choice of contracts to the principal, thereby signalling agent competence to the principal, and there is no alternative reputation mechanism to the contract for the principal's bargaining strategy. It turns out that in this situation, the optimal contract will have a form which may be recognized as a no-cure-no-pay contract.
Subjects: 
contracts
no-cure-no-pay
principal-agent model
asymmetric information
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article
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