[article] 
inManagement science > Vol. 56 N° 9 (Septembre 2010) . - pp. 1568-1583

Titre :	Timing of effort and reward : Three-sided moral hazard in a continuous-time model
Type de document :	texte imprimé
Auteurs :	Jun Yang, Auteur
Année de publication :	2010
Article en page(s) :	pp. 1568-1583
Note générale :	Management
Langues :	Anglais (eng)
Mots-clés :	Optimal contract Incentives Moral hazard in teams Continuous time
Index. décimale :	658 Organisation des entreprises. Techniques du commerce
Résumé :	This paper studies a three-sided moral hazard problem with one agent exerting up-front effort and two agents exerting ongoing effort in a continuous-time model. The agents' efforts jointly affect the probability of survival and thus the expected cash flow of the project. In the optimal contract, the timing of payments reflects the timing of effort: payments for up-front effort precede payments for ongoing effort. Several patterns are possible for the cash allocation between the two agents with ongoing effort. In one case, where the two agents face equally severe moral hazard, they share the cash flow equally at each point of time. In another case, where the two agents have different severities of moral hazard, their payments are sequential. In a more general case, the two agents with ongoing effort first receive the cash flow alternately with an increasing frequency of switches and then divide the cash flow at each point of time. This study provides a framework for understanding a broad set of business-contracting issues. The characteristics suggested in the optimal contract help us analyze the causes of business failure such as the recent debacle of mortgage-backed securities.
DEWEY :	658
ISSN :	0025-1909
En ligne :	http://mansci.journal.informs.org/cgi/content/abstract/56/9/1568

[article] Timing of effort and reward : Three-sided moral hazard in a continuous-time model [texte imprimé] / Jun Yang, Auteur . - 2010 . - pp. 1568-1583.
Management
Langues : Anglais (eng)
in Management science > Vol. 56 N° 9 (Septembre 2010) . - pp. 1568-1583

Mots-clés :	Optimal contract Incentives Moral hazard in teams Continuous time
Index. décimale :	658 Organisation des entreprises. Techniques du commerce
Résumé :	This paper studies a three-sided moral hazard problem with one agent exerting up-front effort and two agents exerting ongoing effort in a continuous-time model. The agents' efforts jointly affect the probability of survival and thus the expected cash flow of the project. In the optimal contract, the timing of payments reflects the timing of effort: payments for up-front effort precede payments for ongoing effort. Several patterns are possible for the cash allocation between the two agents with ongoing effort. In one case, where the two agents face equally severe moral hazard, they share the cash flow equally at each point of time. In another case, where the two agents have different severities of moral hazard, their payments are sequential. In a more general case, the two agents with ongoing effort first receive the cash flow alternately with an increasing frequency of switches and then divide the cash flow at each point of time. This study provides a framework for understanding a broad set of business-contracting issues. The characteristics suggested in the optimal contract help us analyze the causes of business failure such as the recent debacle of mortgage-backed securities.
DEWEY :	658
ISSN :	0025-1909
En ligne :	http://mansci.journal.informs.org/cgi/content/abstract/56/9/1568