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Article
"Information, Risk Sharing and Incentives in Agency Problems"
International Economic Review (2017)
  • Jia Xie, Bank of Canada
Abstract
This paper studies the use of information for incentives and risk sharing in agency problems. When the principal is risk neutral or the outcome is contractible, risk sharing is unnecessary or dealt with by a contract on the outcome. In this case, information systems are ranked only according to their informativeness about the agent's action. When the outcome is noncontractible, however, the principal has to rely on imperfect information not only for incentives, but also for risk sharing. Under the first-order approach, this paper characterizes a problem-independent ranking of information systems, relaxing Gjesdal's (1982) criterion. We also find sufficient conditions justifying the first-order approach when output is noncontractible.
Disciplines
Publication Date
September, 2017
Citation Information
Jia Xie. ""Information, Risk Sharing and Incentives in Agency Problems"" International Economic Review Vol. 58 Iss. 1 (2017) p. 157 - 182
Available at: http://works.bepress.com/jia_xie/23/