This paper suggests a reason, other than asymmetric information, why agency contracts are not explicitly contingent on the agent's performance or actions. Two ingredients are essential to this reason. The first is the written form that contracts are required to take to be enforceable. The second is a form of discontinuity in the parties' preferences and in the technology that transforms actions into a (probabilistic) outcome. We show that under these conditions the chosen contract may not be explicitly contingent on the agent's actions although, in principle, such actions are contractible and observable to all parties to the contract, court included.
Describability and agency problems / Anderlini, L.; Felli, L.. - In: EUROPEAN ECONOMIC REVIEW. - ISSN 0014-2921. - 42:1(1998), pp. 35-59. [10.1016/S0014-2921(96)00062-1]
Describability and agency problems
Anderlini L.
;
1998
Abstract
This paper suggests a reason, other than asymmetric information, why agency contracts are not explicitly contingent on the agent's performance or actions. Two ingredients are essential to this reason. The first is the written form that contracts are required to take to be enforceable. The second is a form of discontinuity in the parties' preferences and in the technology that transforms actions into a (probabilistic) outcome. We show that under these conditions the chosen contract may not be explicitly contingent on the agent's actions although, in principle, such actions are contractible and observable to all parties to the contract, court included.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
