On the Performance of Linear Contracts

B-Tier
Journal: Journal of Economics & Management Strategy
Year: 2011
Volume: 20
Issue: 1
Pages: 159-193

Score contribution per author:

0.670 = (α=2.01 / 3 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We examine the ability of linear contracts to replicate the performance of optimal unrestricted contracts in the canonical moral hazard setting with a wealth constrained, risk averse agent. We find that in a broad class of environments, the principal can always secure with a linear contract at least 95% of the profit that she secures with an optimal unrestricted contract, provided the productivity of the agent's effort is not too meager.

Technical Details

RePEc Handle
repec:bla:jemstr:v:20:y:2011:i:1:p:159-193
Journal Field
Industrial Organization
Author Count
3
Added to Database
2026-01-24