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Incentives for Contract Designers

Authors: Alexander Rodivilov;

Incentives for Contract Designers

Abstract

This paper examines the optimal provision of incentives for contract designers. A principal hires an agent to draft a contract that is incomplete because the ex-ante specified design might not be appropriate ex-post. The degree of contract incompleteness is endogenously determined by the effort exerted by the agent, who can manipulate the principal's beliefs because his effort may not be observable (moral hazard), and he might be better informed at the outset (adverse selection). We characterize the optimal incentive scheme for the agent and discuss implications for the degree of buyer-seller contract incompleteness and the optimal prices. Without adverse selection, the principal-seller contract is more incomplete and is coupled with a smaller price in a better environment. If the adverse selection problem is severe enough, the principal-seller contract is less incomplete and is coupled with a higher price in a better environment.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
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