The Effects of Risk Aversion on Production Decisions in Decentralized Organizations

The Effects of Risk Aversion on Production Decisions in Decentralized Organizations

This paper presents a principal-agent model in which subsequent to contracting the risk averse agent becomes informed about the production process. Communication of the agent's information is always valuable. The optimal contract given this information asymmetry is characterized by less product...

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Bibliographische Detailangaben
Veröffentlicht in:Management Science. - Institute for Operations Research and the Management Sciences, 1954. - 39(1993), 7, Seite 794-805
1. Verfasser: Arya, Anil (VerfasserIn)
Weitere Verfasser: Fellingham, John C., Young, Richard A.
Format: Online-Aufsatz
Sprache:English
Veröffentlicht: 1993
Zugriff auf das übergeordnete Werk:Management Science
Schlagworte:Agency Theory Asymmetric Information Efficiency Loss Risk Aversion Economics Business Behavioral sciences Information science Law
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520 |a This paper presents a principal-agent model in which subsequent to contracting the risk averse agent becomes informed about the production process. Communication of the agent's information is always valuable. The optimal contract given this information asymmetry is characterized by less production and a larger risk premium than when information is symmetric, leading to an efficiency loss. Comparative statics show that the loss in expected production increases as the agent becomes more risk averse. 
540 |a Copyright 1993 The Institute of Management Sciences 
650 4 |a Agency Theory 
650 4 |a Asymmetric Information 
650 4 |a Efficiency Loss 
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650 4 |a Business  |x Business economics  |x Commercial production  |x Production management 
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650 4 |a Economics  |x Economic disciplines  |x Financial economics  |x Insurance  |x Insurance expenses  |x Insurance premiums  |x Risk premiums 
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655 4 |a research-article 
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700 1 |a Young, Richard A.  |e verfasserin  |4 aut 
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952 |d 39  |j 1993  |e 7  |h 794-805