The Principal–Agent Problem

James Bergin

in Microeconomic Theory

Published in print May 2005 | ISBN: 9780199280292
Published online July 2005 | e-ISBN: 9780191602498 | DOI:
 The Principal–Agent Problem

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The principal-agent problem is considered. The full information case is taken as the benchmark and efficient risk allocation with a risk averse principal and risk averse agent is considered, again with full information. Turning to the incomplete information case, unobservable effort raises the key incentive problem. The first order approach is discussed at length and key conditions for sufficiency of the approach examined.

Keywords: efficient risk allocation; first-order approach; monotone likelihood ratio

Chapter.  8524 words.  Illustrated.

Subjects: Microeconomics

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