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The Optimality of Team Contracts
AbstractThis paper analyzes optimal contracts in a linear hidden-action model with normally distributed returns possessing two moments that are governed jointly by two agents who have negative exponential utilities. They can observe and verify each others’ effort levels and draft enforceable side-contracts on effort levels and realized returns. Standard constraints, resulting in incentive contracts, fail to ensure implementability, and we examine centralized collusion-proof contracts and decentralized team contracts, as well. We prove that the principal may restrict attention to team contracts whenever returns from the project satisfy a mild monotonicity condition.
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Barlo, M.; Özdoğan, A. The Optimality of Team Contracts. Games 2013, 4, 670-689.View more citation formats
Barlo M, Özdoğan A. The Optimality of Team Contracts. Games. 2013; 4(4):670-689.Chicago/Turabian Style
Barlo, Mehmet; Özdoğan, Ayça. 2013. "The Optimality of Team Contracts." Games 4, no. 4: 670-689.