Supervisory Incentives within Contracts: A Principal-Supervisor-Agent Approach

Outsourcing Relationships: Designing 'Optimal' Contracts: A Principal-Agent-Theoretic Approach

Information Systems literature emphasizes the importance of efficient contracts for managing outsourcing relationships. However, there is a lack of proven and tested contract designs in theory as well as in practice. With the help of Economic Theory we analyze the underlying dynamics of an outsourcing relationship. Based on mathematical Principal-Agent-Theory we aim at answering the following q...

Corporate Design for Regulability A Principal-Agent-Supervisor Model

Collusion and Renegotiation in Principal-Supervisor-Agent Models∗

We aim at examining the interactions between collusion and renegotiation in a principal-supervisor-agent framework, in which the supervisor and agent can collude while the principal can subsequently renegotiate. Despite common sense and the findings in the literature that collusion and renegotiation are usually costly when considered separately, we find that they play a weakly positive role whe...

Optimal Dynamic Contracts for a Large-Scale Principal-Agent Hierarchy: A Concavity-Preserving Approach

We present a continuous-time contract whereby a top-level player can incentivize a hierarchy of players below him to act in his best interest despite only observing the output of his direct subordinate. This paper extends Sannikov’s approach from a situation of asymmetric information between a principal and an agent to one of hierarchical information between several players. We develop an itera...

Fairness and Incentives in a Multi-task Principal–Agent Model*

This paper reports on a two-task principal–agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece-rate contracts. Many principals reward high effort on both tasks with substantial bonuses. Agents anticipate this and provide high effort on both tasks. In contrast,...