Loss Aversion, Moral Hazard, and Stochastic Contracts

IF 2.5 3区经济学 Q2 ECONOMICS

Managerial and Decision Economics Pub Date : 2024-12-18 DOI:10.1002/mde.4459

Hoa Ho

引用次数: 0

Abstract

I examine whether stochastic contracts benefit the principal under moral hazard and loss aversion. Incorporating the agent's expectation-based loss aversion and allowing for stochastic contracts, I find that stochastic contracts reduce the principal's cost as compared with deterministic contracts. The optimal stochastic contract pays a high wage not only when good signals are realized but also with a positive probability after the realization of bad signals. The findings have an important implication for designing contracts for loss-averse agents: the principal should insure the agent against wage uncertainty by employing stochastic contracts that increase the probability of a high wage.

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损失规避、道德风险和随机合约

我研究了在道德风险和损失规避下随机契约是否有利于委托人。结合代理人基于期望的损失厌恶并允许随机契约，我发现与确定性契约相比，随机契约降低了委托人的成本。最优随机契约不仅在实现好信号时支付高工资，而且在实现坏信号后支付正概率高工资。研究结果对为规避损失的代理人设计合同具有重要意义：委托人应该通过采用增加高工资概率的随机合同来确保代理人免受工资不确定性的影响。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Managerial and Decision Economics Multiple-

CiteScore

1.40

自引率

18.20%

发文量

242

期刊介绍： Managerial and Decision Economics will publish articles applying economic reasoning to managerial decision-making and management strategy.Management strategy concerns practical decisions that managers face about how to compete, how to succeed, and how to organize to achieve their goals. Economic thinking and analysis provides a critical foundation for strategic decision-making across a variety of dimensions. For example, economic insights may help in determining which activities to outsource and which to perfom internally. They can help unravel questions regarding what drives performance differences among firms and what allows these differences to persist. They can contribute to an appreciation of how industries, organizations, and capabilities evolve.