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The RAND Journal of Economics
Article . 1984 . Peer-reviewed
License: Wiley TDM
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Ex ante Randomization in Agency Models

Authors: KWON, Young Koan; Fellingham, J.; Newman, P.;

Ex ante Randomization in Agency Models

Abstract

We consider how a principal can use randomized strategies in designing optimal contracts in agency settings. We distinguish between ex post randomization (overfee schedulesfollowing act selection by the agent) and ex ante randomization (overfee schedules before act selection). We show that ex ante randomization may be efficient in both full information and private information settings under certain assumptions regarding preferences and the production technology. It is particularly significant that additive separability and concavity ofthe agent's utility function as well as concavity of the production function do not rule out efficient ex ante randomized contracts in private information settings, although, as is known, they rule out ex post randomization.

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    selected citations
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    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).
    21
    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.
    Average
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
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    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
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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!
21
Average
Top 10%
Average
bronze