Moral Hazard Contracts: Does One Size Fit All?
Alexander K. Koch
University of Aarhus - School of Economics and Management; Institute for the Study of Labor (IZA)
HEC Paris - Economics & Decision Sciences
IZA Discussion Paper No. 2463
Incentive theory predicts that contract terms should respond to differences in agents' productivities. Firms' practice of anonymous contracts thus appears puzzling. We show that such a "one-size-fits-all" approach can be reconciled with standard agency theory if careers are marked by frequent transitions between employers, and agents have career concerns because complete long-term contracts are not feasible.
Number of Pages in PDF File: 9
Keywords: anonymous contracts, career concerns, incentive contracts, reputation
JEL Classification: D80, J33, L14, M12working papers series
Date posted: December 5, 2006
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