Optimal contracting of separable production technologies. (English) Zbl 0891.90037
Summary: We analyze the class of agency problems with a risk-neutral principal and risk-averse agent, in which hidden actions and hidden information (on the agent’s efficiency) are jointly present. Technological assumptions such as monotonicity of likelihood are no longer sufficient for the optimal contract to be monotone in the sharing rule. We show that these regularity properties obtain for the rather wide class of production technologies that are separable in the agent’s inputs. Together with ordinal properties such as monotone differences and affiliation of inputs, separability yields the monotonicity in efficiency of the agent’s actions and indirect utility.
MSC:
| 91B44 | Economics of information |
| 91B38 | Production theory, theory of the firm |
| 91A65 | Hierarchical games (including Stackelberg games) |
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