Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92568
Authors: 
Ogawa, Ryo
Year of Publication: 
2010
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 767
Abstract: 
In dynamic principal-agent relationships, it is sometimes observed that the agent's reward depends only on the final outcome. For example, a student's grade in a course quite often depends only on the final exam score, where the performance in the problem sets and the mid-term exam is ignored. The present paper shows that such an arrangement can be optimal if the agent's effort in each period has strong persistent effects. It is shown that the optimality of such a simple payment scheme crucially depends on the first order stochastic dominance of the final outcome under various effort sequences.
Subjects: 
dynamic moral hazard
history dependence
simple contract
first-order stochastic dominance
JEL: 
D82
J31
M52
Document Type: 
Working Paper

Files in This Item:
File
Size
284.79 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.