Hunting with Two Bullets: Moral Hazard with a Second Chance

Detalhes bibliográficos
Autor(a) principal: Fagandini, Paulo
Data de Publicação: 2018
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)
Texto Completo: http://hdl.handle.net/10362/82724
Resumo: I study the moral hazard problem where an agent can create an extra instance of effort and potentially improve bad realizations of the outcome before the principal observes it. The agent cannot hide the outcome of his effort, but just the way he achieved it. Findings are that both, principal and agent, value the option of improving the outcome in case of a bad realization if doing so is cheap. I also find that contracted effort is not always decreasing in its cost. Finally, if the creation of the extra instance can cause a punishment for the principal, and if that punishment is sufficiently big, the principal will avoid writing contracts that incentive effort only on the extra chance.
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spelling Hunting with Two Bullets: Moral Hazard with a Second ChanceMoral HazardAsymmetric InformationContract TheorySecond ChanceI study the moral hazard problem where an agent can create an extra instance of effort and potentially improve bad realizations of the outcome before the principal observes it. The agent cannot hide the outcome of his effort, but just the way he achieved it. Findings are that both, principal and agent, value the option of improving the outcome in case of a bad realization if doing so is cheap. I also find that contracted effort is not always decreasing in its cost. Finally, if the creation of the extra instance can cause a punishment for the principal, and if that punishment is sufficiently big, the principal will avoid writing contracts that incentive effort only on the extra chance.Nova SBERUNFagandini, Paulo2019-09-30T10:08:02Z2018-11-292018-11-29T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/82724engFagandini, Paulo, Hunting with Two Bullets: Moral Hazard with a Second Chance (November 29, 2018). FEUNL Working Paper Series No. 629info:eu-repo/semantics/openAccessreponame:Repositórios Científicos de Acesso Aberto de Portugal (RCAAP)instname:FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiainstacron:RCAAP2024-05-22T17:41:15Zoai:run.unl.pt:10362/82724Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireinfo@rcaap.ptopendoar:https://opendoar.ac.uk/repository/71602025-05-28T17:12:29.584709Repositórios Científicos de Acesso Aberto de Portugal (RCAAP) - FCCN, serviços digitais da FCT – Fundação para a Ciência e a Tecnologiafalse
dc.title.none.fl_str_mv Hunting with Two Bullets: Moral Hazard with a Second Chance
title Hunting with Two Bullets: Moral Hazard with a Second Chance
spellingShingle Hunting with Two Bullets: Moral Hazard with a Second Chance
Fagandini, Paulo
Moral Hazard
Asymmetric Information
Contract Theory
Second Chance
title_short Hunting with Two Bullets: Moral Hazard with a Second Chance
title_full Hunting with Two Bullets: Moral Hazard with a Second Chance
title_fullStr Hunting with Two Bullets: Moral Hazard with a Second Chance
title_full_unstemmed Hunting with Two Bullets: Moral Hazard with a Second Chance
title_sort Hunting with Two Bullets: Moral Hazard with a Second Chance
author Fagandini, Paulo
author_facet Fagandini, Paulo
author_role author
dc.contributor.none.fl_str_mv RUN
dc.contributor.author.fl_str_mv Fagandini, Paulo
dc.subject.por.fl_str_mv Moral Hazard
Asymmetric Information
Contract Theory
Second Chance
topic Moral Hazard
Asymmetric Information
Contract Theory
Second Chance
description I study the moral hazard problem where an agent can create an extra instance of effort and potentially improve bad realizations of the outcome before the principal observes it. The agent cannot hide the outcome of his effort, but just the way he achieved it. Findings are that both, principal and agent, value the option of improving the outcome in case of a bad realization if doing so is cheap. I also find that contracted effort is not always decreasing in its cost. Finally, if the creation of the extra instance can cause a punishment for the principal, and if that punishment is sufficiently big, the principal will avoid writing contracts that incentive effort only on the extra chance.
publishDate 2018
dc.date.none.fl_str_mv 2018-11-29
2018-11-29T00:00:00Z
2019-09-30T10:08:02Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10362/82724
url http://hdl.handle.net/10362/82724
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Fagandini, Paulo, Hunting with Two Bullets: Moral Hazard with a Second Chance (November 29, 2018). FEUNL Working Paper Series No. 629
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv Nova SBE
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