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On the efficiency of the rank-order contract under moral hazard and adverse selection

Title
On the efficiency of the rank-order contract under moral hazard and adverse selection
Authors
Yun J.
Ewha Authors
윤정열
SCOPUS Author ID
윤정열scopus
Issue Date
1997
Journal Title
Journal of Labor Economics
ISSN
0734-306XJCR Link
Citation
vol. 15, no. 3, pp. 466 - 494
Indexed
SSCI; SCOPUS scopus
Abstract
This article analyzes the efficiency of the rank-order contract for a finite number of risk-neutral agents under both moral hazard and adverse selection. The first-best outcome is shown to be supported by a set of rank-order contracts which penalize a small fraction of agents but do so heavily. The article also shows how these rank-order contracts compare with those giving a large prize to few agents. Finally, the article provides an informal argument for why firms do not follow a penalty-giving rank-order contract in their promotion policies as often as the theory predicts.
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사회과학대학 > 경제학전공 > Journal papers
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