Moral Hazard and Other-Regarding Preferences ∗

@inproceedings{Itoh2003MoralHA,
  title={Moral Hazard and Other-Regarding Preferences ∗},
  author={Hideshi Itoh},
  year={2003}
}
The paper aims at obtaining new theoretical insights into organizational behavior by combining the standard moral hazard models of principal-agent relationships with theories of other-regarding (social or interdependent) preferences, in particular, inequity aversion theory. In the benchmark model, the principal and the agent are both risk neutral, while the agent is wealth constrained and hence the basic tradeoff between incentives and rent extraction arises. I show that other-regarding… CONTINUE READING
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