Logo
Munich Personal RePEc Archive

Optimality of linearity with collusion and renegotiation

Barlo, Mehmet and Ozdogan, Ayca (2011): Optimality of linearity with collusion and renegotiation.

[thumbnail of MPRA_paper_35548.pdf]
Preview
PDF
MPRA_paper_35548.pdf

Download (229kB) | Preview

Abstract

This study analyzes a continuous-time N-agent Brownian hidden-action model with exponential utilities, in which agents' actions jointly determine the mean and the variance of the outcome process. In order to give a theoretical justi¯cation for the use of linear contracts, as in Holmstrom and Milgrom (1987), we consider a variant of its generalization given by Sung (1995), into which collusion and renegotiation possibilities among agents are incorporated. In this model, we prove that there exists a linear and stationary optimal compensation scheme which is also immune to collusion and renegotiation.

Atom RSS 1.0 RSS 2.0

Contact us: mpra@ub.uni-muenchen.de

This repository has been built using EPrints software.

MPRA is a RePEc service hosted by Logo of the University Library LMU Munich.