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Keywords: principal-agent problem, moral hazard, limited liability
Issue Date: 9-Apr-2018
Citation: ZHANG JINGWEI (2018-04-09). MORAL HAZARD WITH SUBCONTRACTING.. ScholarBank@NUS Repository.
Abstract: The objective of this project is to investigate moral hazard problem with subcontracting. We first review the classical moral hazard problem with limited liability in chapter 1. Then we try to extend the analysis into a three-layer contractual relationship, that is, we allow an investor to offer a contract to a manager, and the manager can offer another contract to a worker. In chapter 2, we clarify the basic model setting, then discuss the optimal contract for the investor to induce both positive efforts of manager and worker with risk neutrality and limited liability, and also exam the optimal condition for the investor to do so. In addition, we use moral hazard in a team as the benchmark to compare the payoff of investor and manager with our model, and also the optimal contract. In the end, we obtain the optimal condition for the investor to choose the optimal model.
Appears in Collections:Bachelor's Theses

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