Linear contracts and the double moral-hazard

Article Abstract:

A unique non-linear optimal contract is present when the agent is risk-averse in a double moral-hazard situation in which the principal also takes part in the production process. However, the agent in a double moral-hazard situation is less sensitive to output than agents in a single moral-hazard situation. Furthermore, linear contract is found not to be robust because the unique non-linear contract does not utilize the linear contract as the risk aversion of the agent approaches zero.

Models, Risk assessment, Linear topological spaces

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Incremental risk aversion and diversification preference

Article Abstract:

Monetary risks which are mean-independent of an initial risk can be acquired by restricting distribution of sums of monetary risk that are individually independent of the initial risk. With this characterization, aversion toward independent risk increases is generally unequivalent to aversion toward mean-preserving risk increases. However, aversion toward dependent risk increases coupled with diversification preference connotes aversion toward all mean-preserving risk increases.

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Wealth effects in the principle agent model

Article Abstract:

The impact of the wealth of an agent on agency and surplus costs of a principal is examined in detail. Issues such as risk aversion and pay-off expectations are examined.

Economic aspects, Wealth

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