Moral hazard and limited liability: The real effects of contract bargaining

Rohan Pitchford

doi:10.1016/s0165-1765(98)00141-4

Moral hazard and limited liability: The real effects of contract bargaining

Rohan Pitchford^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

29 Citations (Scopus)

Abstract

I examine the standard assumption in the moral hazard agency literature that the principal has all the bargaining power at the contract offer stage. When the agent has limited liability, as is often the case in practice, the contract changes according to the distribution of bargaining power, and consequently so does the agents effort. Implications of this result are examined.

Original language	English
Pages (from-to)	251-259
Number of pages	9
Journal	Economics Letters
Volume	61
Issue number	2
DOIs	https://doi.org/10.1016/s0165-1765(98)00141-4
Publication status	Published - 1 Nov 1998

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Moral hazard and limited liability: The real effects of contract bargaining

Abstract

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