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Optimal incentive contracts with a spiteful principal: Single agent

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  • Banerjee, Swapnendu
  • Chakraborty, Somenath

Abstract

We, first with discrete outcomes and continuous effort, characterize the optimal contracts when a spiteful principal interacts with an other-regarding agent. We show that the optimal wage is weakly decreasing in principal’s spitefulness. When the principal and the agent have exactly opposite other-regarding preferences, under certain situations, we get back the self-regarding benchmark optimal contract. Next with continuous outcomes and general functional forms, we characterize the optimal wage schedule and get back the sufficient statistics result when the principal and the agent have exactly opposite other-regarding preferences.

Suggested Citation

  • Banerjee, Swapnendu & Chakraborty, Somenath, 2023. "Optimal incentive contracts with a spiteful principal: Single agent," Mathematical Social Sciences, Elsevier, vol. 122(C), pages 29-41.
    • Handle: RePEc:eee:matsoc:v:122:y:2023:i:c:p:29-41
    DOI: 10.1016/j.mathsocsci.2023.01.005
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