Munich Personal RePEc Archive

Other regarding principal and moral hazard: the single agent case

Banerjee, Swapnendu and Sarkar, Mainak (2014): Other regarding principal and moral hazard: the single agent case.

[img]
Preview
PDF
MPRA_paper_59654.pdf

Download (171kB) | Preview

Abstract

Using the classic moral hazard problem with limited liability we characterize the optimal incentive contracts when first an other-regarding principal interacts with a self-regarding agent. The optimal contract differs considerably when the principal is ‘inequity averse’ vis-a-vis the self-regarding case. Also the agent is generally (weakly) better-off under an ‘inequity averse’ principal compared to a ‘status seeking’ principal. Then we extend our analysis and characterize the optimal contracts when both other-regarding principal and other-regarding agent interact.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.