Absract:

We consider a principal-agent model with moral hazard involving a risk-neutral principal and a possibly risk-averse agent. We study procurement contracts in which transfers are contingent both on realized output and on evidence about the expected output. The agent privately chooses the project and may falsify the evidence at some cost. For any given lower bound of the falsification costs, we characterize the set of contracts whose equilibrium outcome Pareto-dominates the outcome of a residual claimant contract in a robust manner, i.e. for any possible realization of the agent's technology and risk preferences: such robust risk-sharing procurement are menus of equity contracts, with a set of constraints regarding the percentage stake of output transferred to the agent as a function of the evidence. Under mild restrictions, we characterize an optimal robust Pareto-improvement.

Joint work with Clément Leblanc

Location:

Room 1B36, CEPS ENS Paris-Saclay
4 avenue des Sciences, 91190, Gif-sur-Yvette