Marini, Marco A. and Polidori, Paolo and Ticchi, Davide and Teobaldelli, Désirée Optimal Incentives in a Principal-Agent Model with Endogenous Technology. Working Paper #04/2013 Università degli studi di Urbino. Facoltà di economia ISSN 1974-4110.Full text not available from this repository.
One of the standard predictions of the agency theory is that more incentives can be given to agents with lower risk aversion. In this paper we show that this relationship may be absent or reversed when the technology is endogenous and projects with a higher e¢ ciency are also riskier. Using a modi ed version of the Holmstrom and Milgrom's (1987) framework, we obtain that lower agent's risk aversion unambiguously leads to higher incentives when the technology function linking efficiency and riskiness is elastic, while the risk aversion-incentive relation- ship can be positive when this function is rigid.
|Item Type:||Working Paper (Working Paper)|
|Additional Information:||Working Papers Series in Economics, Mathematics and Statistics|
|Uncontrolled Keywords:||Keywords: Principal-agent; Incentives; Risk aversion; Endogenous technolog - JEL Classification: D82|
|Subjects:||H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management
|Research Area:||Economics and Institutional Change|
|Depositing User:||Ms T. Iannizzi|
|Date Deposited:||28 Oct 2013 10:47|
|Last Modified:||28 Oct 2013 10:47|
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