Review paper
Hidden action and outcome contractibility: An experimental test of moral hazard theory
Abstract
In a laboratory experiment with 754 participants, we study the canonical one-shot moral hazard problem, comparing treatments with unobservable effort to benchmark treatments with verifiable effort. In our experiment, the players endogenously negotiate contracts. In line with contract theory, the contractibility of the outcome plays a crucial role when effort is a hidden action. If the outcome is contractible, most players overcome the hidden...
Paper Details
Title
Hidden action and outcome contractibility: An experimental test of moral hazard theory
Published Date
May 1, 2018
Journal
Volume
109
Pages
544 - 564
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