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Robustness of a fixed-rent contract in a standard agency model

Author

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  • Son Kim
  • Susheng Wang

Abstract

It is well known that there are infinitely many incentive contracts that achieve the full information outcome in the standard agency model when the agent is risk-neutral. However, since Harris and Raviv (1979), the fixed-rent contract has been the focal point among those infinitely many first-best contracts. This paper examines whether the fixed-rent contract is robust or not in various circumstances. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Son Kim & Susheng Wang, 2004. "Robustness of a fixed-rent contract in a standard agency model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 111-128, July.
    • Handle: RePEc:spr:joecth:v:24:y:2004:i:1:p:111-128
    DOI: 10.1007/s00199-003-0411-2
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    Cited by:

    1. Wang Susheng, 2010. "Contractual Incompleteness for External Risks," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-36, April.
    2. Hensher, David A. & Ho, Chinh & Knowles, Louise, 2016. "Efficient contracting and incentive agreements between regulators and bus operators: The influence of risk preferences of contracting agents on contract choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 22-40.

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