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Article dans une revue

Contracting Under Unverifiable Monetary Costs

Abstract : We consider a contracting relationship where the agent's effort induces monetary costs, and limits on the agent's resource restrict his capability to exert effort. We show that, the principal finds it best to offer a sharing contract while providing the agent with an up-front financial transfer only when the monetary cost is neither too low nor too high. Thus, unlike in the limited liability literature, the principal might find it optimal to fund the agent. Moreover, both incentives and the amount of funding are non-monotonic functions of the monetary cost. These results suggest that an increase in the interest rate may affect the form of contracts differently , depending on the initial level of the former. Using the analysis, we provide and discuss several predictions and policy implications.
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Déposant : Raphael Soubeyran <>
Soumis le : vendredi 12 juin 2020 - 14:03:51
Dernière modification le : jeudi 11 février 2021 - 03:30:04


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Nicolas Quérou, Antoine Soubeyran, Raphael Soubeyran. Contracting Under Unverifiable Monetary Costs. Journal of Economics and Management Strategy, Wiley, 2020, 29 (4), pp.892-909. ⟨10.1111/jems.12389⟩. ⟨hal-02866383⟩



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