Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76361
Authors: 
Englmaier, Florian
Wambach, Achim
Year of Publication: 
2002
Series/Report no.: 
CESifo Working Paper 809
Abstract: 
Using the concept of Inequity Aversion we derive in a Moral Hazard setting several results which differ from conventional contract theory. Our three key insights are: First, inequity aversion plays a crucial role in the design of optimal contracts. Second, there is a strong tendency towards linear sharing rules, giving a simple and plausible rationale for the prevalence of these schemes in the real world. Third, the Sufficient Statistics result no longer holds as optimal contracts may be ”too” complete. Along with these key insights we derive a couple of further results.
Subjects: 
contract theory
linear contracts
incentives
sufficient statistics result
inequity aversion
fairness
JEL: 
D63
J30
M12
Z13
Document Type: 
Working Paper

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