Decision Sciences
8 years ago

Shared information eliminates moral hazard in principal-agent relationships under uncertainty.

Common-knowledge and moral hazard in principal-agent model
Takashi Matsuhisa

Paper Summary

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The article discusses how sharing information between a boss and employees can prevent problems in a work relationship. If both sides know and talk about their costs, there won't be issues with hidden intentions. This can happen when they both understand and talk about how much things will cost in the long term.