Using the classic moral hazard problem with limited liability we characterize the optimal incentive contracts when first an other-regarding principal interacts with a self-regarding agent. The optimal contract differs considerably when the principal is ‘inequity averse’ vis-a-vis the self-regarding case. Also the agent is generally (weakly) better-off under an ‘inequity averse’ principal compared to a ‘status seeking’ principal. Then we extend our analysis and characterize the optimal contracts when both other-regarding principal and other-regarding agent interact.

Professor Swapnendu Banerjee the Subir Chowdhury Fellow 2015-16 at the LSE India Observatory.

Dr Ruth Kattumuri is Co-Director of the LSE India Observatory.

Additional information

This event is free and open to all with no ticket required. Entry is on a first come first served basis. Please direct any queries to india.observatory@lse.ac.uk or call 020 7955 7615.

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Other Regarding Principal and Moral Hazard: A Microeconomic Analysis

Wednesday 4th May 2016, 2pm to 3.30pm, Room 32L.LG.02, 32 Lincoln’s Inn Fields, LSE

Additional information

Wednesday 4^th May 2016, 2pm to 3.30pm, Room 32L.LG.02, 32 Lincoln’s Inn Fields, LSE