Moral Hazard and Bargaining over Incentive Contracts

摘要: This paper analyses bargaining over an incentive compatible contract in a moral hazard framework. We introduce the Kalai-Smorodinsky solution and compare outcome with commonly applied Nash solution. Whether worker’s effort is higher or depends on agents. power. If agents have equal power, yields more efficient induces effort. The social planner can mitigate inefficiencies arising both solutions from problem even achieve first-best by allocating agents’ raising power necessary to solution, this increase must be than