The objective of this paper is to analyze the effect of linear sharing contracts when downstream retail prices are used for compensation in a context of imperfect informa-tion about food quality. Such outcome-sharing through retail price contracts can be explained directly by agency theory. While the case of both parties being subject to moral hazard due to supplying unobservable efforts has been considered in the litera-ture, we believe our specification is new and more realistic, as we consider the quan-tity-quality trade-off for the grower, ignored in previous double moral hazard models. With the help of a simulation exercise, we prove that an outcome-conditioned share re-duces an agent’s incentive to make an effort in quality input. [...]
Quality and Double Sided Moral Hazard in Share Contracts
PERITO, Maria Angela;
2011-01-01
Abstract
The objective of this paper is to analyze the effect of linear sharing contracts when downstream retail prices are used for compensation in a context of imperfect informa-tion about food quality. Such outcome-sharing through retail price contracts can be explained directly by agency theory. While the case of both parties being subject to moral hazard due to supplying unobservable efforts has been considered in the litera-ture, we believe our specification is new and more realistic, as we consider the quan-tity-quality trade-off for the grower, ignored in previous double moral hazard models. With the help of a simulation exercise, we prove that an outcome-conditioned share re-duces an agent’s incentive to make an effort in quality input. [...]I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
