Fairness , Incentives and Contractual Incompleteness

  title={Fairness , Incentives and Contractual Incompleteness},
  author={Ernst Fehr and Alexander Klein and Klaus M. Schmidt},
We show that concerns for fairness may have dramatic consequences for the optimal provision of incentives in a moral hazard context. Incentive contracts that are optimal when there are only selfish actors become inferior when some agents are concerned about fairness. Conversely, contracts that are doomed to fail when there are only selfish actors provide… CONTINUE READING

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