Overstatement and Rational Market Expectation

Posted: 1 Feb 2010

Date Written: 2009

Abstract

When an agent overstates his/her true performance, a rational market can still correctly guess the true performance. This paper shows, however, that such rational market expectation and a profit-maximizing principal can exacerbate the lack of productive effort by the agent.

Keywords: Overstatement, Rational expectation, Moral hazard

JEL Classification: L2, D8, J3

Suggested Citation

Kwon, Illoong, Overstatement and Rational Market Expectation (2009). Economics Letters, Vol. 104, No. 1, 2009. Available at SSRN: https://ssrn.com/abstract=1545814

Illoong Kwon (Contact Author)

Seoul National University ( email )

Graduate School of Public Administration
599 Gwanak-ro
Gwanak-gu, Seoul 151-742
Korea, Republic of (South Korea)
82-2-880-8551 (Phone)
82-2-877-2411 (Fax)

HOME PAGE: http://www.albany.edu/~ik325357/

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