Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/98497
Authors: 
Barlo, Mehmet
Özdoægan, Ayça
Year of Publication: 
2013
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Publisher:] MDPI [Place:] Basel [Volume:] 4 [Year:] 2013 [Issue:] 4 [Pages:] 670-689
Abstract: 
This paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents who have negative exponential utilities. They can observe and verify each others' effort levels and draft enforceable side-contracts on effort levels and realized returns. Standard constraints, resulting in incentive contracts, fail to ensure implementability, and we examine centralized collusion-proof contracts and decentralized team contracts, as well. We prove that the principal may restrict attention to team contracts whenever returns from the project satisfy a mild monotonicity condition.
Subjects: 
principal-agent problems
linear contracts
collusion
team
decentralization
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/3.0/
Document Type: 
Article
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