Asymmetric awareness and heterogeneous agents
Bibliographic Data
| ID | 5722232 |
|---|---|
| Authors | Antoine Dubus (0000-0001-5726-155X, ECARES, ULB, Belgium, corresponding author) |
| Year | 2020 |
| Volume | 32 |
| Issue | 4 |
| Pages | 461-484 |
| Publication date | 2020-11-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Rationality and Society (JOURNAL) |
| Journal identifiers | ISSN: 1043-4631 • E-ISSN: 1461-7358 |
| Publisher | SAGE Publications Inc (PUBLISHER) |
| DOI | 10.1177/1043463120963403 |
| OpenAlex | W2619197611 |
| Language | EN |
| References cited | 14 |
We consider a principal-agent model with moral-hazard and asymmetric awareness and show how the heterogeneity of agents on their aversion to effort affects contract design. We discuss the optimal contract adopted when a principal is aware of all the impacts of an agent's action, while agents ignore some of them. When a principal faces two types of agents, where one type is more effort-averse than the other, the equilibrium contract is shaped by agent proportions: it pools the agents, separates them, or excludes the more effort-averse agents from the contract. When efforts are observable, all the agents remain unaware, while when efforts are hidden, a principal increases the awareness of the agents to a level commensurate with the nature of the contract. JEL Codes - D82; D83; D86
Business · Contract theory · Economics · Expected utility hypothesis · Incentive · Mathematical economics · Microeconomics · Moral hazard · Principal–agent problem · Auction Theory and Applications · Complex Systems and Time Series Analysis · Computer Science · Game Theory and Applications · Finance
| Highly cited | No |
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