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The irreversibility effect and agency conflicts

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  • Clemens Löffler
  • Thomas Pfeiffer
  • Georg Schneider

Abstract

This paper studies the influence of agency conflicts on the irreversibility effect. Using a dynamic variant of the static Baron and Myerson (Econometrica 50(4):911–930, 1982 ) adverse selection model, we characterize under which circumstances the irreversibility effect arises in the presence and absence of an agency conflict. In particular, we find that in the presence of an agency conflict the irreversibility effect arises in more circumstances than in the standard first-best analysis that abstracts from agency problems. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Clemens Löffler & Thomas Pfeiffer & Georg Schneider, 2013. "The irreversibility effect and agency conflicts," Theory and Decision, Springer, vol. 74(2), pages 219-239, February.
    • Handle: RePEc:kap:theord:v:74:y:2013:i:2:p:219-239
    DOI: 10.1007/s11238-012-9331-6
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    2. Michail Chronopoulos & Verena Hagspiel & Stein-Erik Fleten, 2017. "Stepwise investment and capacity sizing under uncertainty," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(2), pages 447-472, March.

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