The Bell Journal of Economics
Moral Hazard and Observability
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Preprint, hosted by Federal Reserve Bank of St. Louis (dklevine.com)
This is the authors’ own version from before peer review, so it may differ from the published paper.
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The role of imperfect information in a principal-agent relationship subject to moral hazard is considered.A necessary and sufficient condition for imperfect information to improve on contracts based on the payoff alone is derived, and a characterization of the optimal use of such information is given.
DOI: 10.2307/3003320 · Publisher: JSTOR