Required reading: Chapter 6: Milgrom, Paul, and John Roberts, 1992, Economics, Organization and Management (PrenticeHall: London). Supplementary reading: *Sappington, David E. M., 1991, Incentives in principal-agent relationships, Journal of Economic Perspectives 5(2), 45-66. Chapter 4: Laffont, Jean-Jacques, and David Martimort, 2002, The Theory of Incentives: The Principal-Agent Model (Prince...

This paper analyses the impact of retailer overconfidence psychology on incentive contract for a manufacturer-retailer supply chain, where product quality is affected by the manufacturer and the retailer’s behaviors. There exists double-sided moral hazard in the supply chain. Using principal-agent model, this paper builds incentive contracts under symmetric and asymmetric information situations...

Economic unions, such as American states, Canadian provinces, or EU countries, face the problem of how to allocate union-wide corporate profits among its individual members when each member retains some taxing authority. This paper studies the normative properties of two common types of allocation mechanisms, separate accounting and formula apportionment, when firms have private cost informatio...

B ought to refrain from φing. Taking a 10% chance is taking a substantial chance of doing a deeply morally wrong thing. One should be very averse to risking doing a deeply wrong thing. It is better to do what is very likely a minorly wrong thing to do than to risk doing what is a deeply wrong thing to do. Suppose that B does φ, φing is in fact morally wrong, and a victim of B’s φing were to lat...

We study an economy where intermediaries compete over contracts in a nonexclusive insurance market affected by moral hazard. Our setting is the same as that developed in Bisin and Guaitoli [2004]. The present note provides a counterexample to the set of necessary conditions for high effort equilibria developed in Bisin and Guaitoli [2004] and suggests an alternative equilibrium characterization.