%0 Report
%9 Working Paper
%A Marini, Marco A.
%A Polidori, Paolo
%A Ticchi, Davide
%A Teobaldelli, Désirée
%D 2013
%F eprints:1855
%I Università degli studi di Urbino Carlo Bo
%K Keywords: Principal-agent; Incentives; Risk aversion; Endogenous technolog   -  JEL Classification: D82
%N 04
%T Optimal Incentives in a Principal-Agent Model with Endogenous Technology
%U http://eprints.imtlucca.it/1855/
%X 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.
%Z Working Papers Series in Economics, Mathematics and Statistics