Corporate Law and Corporate Governance
Moral Hazard and Observability
Bengt Holmstrom
- Year
- 1979
- Venue
- Bell Journal of Economics
- Level
- Advanced
Summary
Analyzes incentive contracts when an agent's action cannot be directly observed but signals about performance are available. The article develops the informativeness principle, showing how optimal compensation should use performance measures that provide information about the agent's effort.
Citation
Bengt Holmstrom. "Moral Hazard and Observability." Bell Journal of Economics, 1979.
BibTeX
@article{Holmstrom1979Moral,
title = {Moral Hazard and Observability},
author = {Bengt Holmstrom},
year = {1979},
journal = {Bell Journal of Economics},
url = {https://www.jstor.org/stable/3003320}
}