Regulating a manager whose empire-building preferences are private information - Aix-Marseille Université Accéder directement au contenu
Article Dans Une Revue Journal of Economics Année : 2014

Regulating a manager whose empire-building preferences are private information

Ana Borges
  • Fonction : Auteur
Joao Correia-Da-Silva
  • Fonction : Auteur

Résumé

We obtain the optimal contract for the government (principal) to regulate a manager (agent) who has a taste for empire-building that is his/her private information. This taste for empire-building is modeled as a utility premium that is proportional to the difference between the contracted output and a reference output. We find that output is distorted upward when the manager's taste for running large firms is weak, downward when it is strong, and equals a reference output when it is intermediate (in this case, the participation constraint is binding). We also obtain an endogenous reference output (equal to the expected output, which depends on the reference output), and find that the response of output to cost is null in the short-run (in which the reference output is fixed), whenever the manager's type is in the intermediate range, and negative in the long-run (after the adjustment of the reference output to equal expected output). Copyright Springer-Verlag Wien 2014
Fichier non déposé

Dates et versions

hal-01474432 , version 1 (22-02-2017)

Identifiants

  • HAL Id : hal-01474432 , version 1

Citer

Ana Borges, Joao Correia-Da-Silva, Didier Laussel. Regulating a manager whose empire-building preferences are private information. Journal of Economics, 2014, 111 (2), pp.105--130. ⟨hal-01474432⟩
38 Consultations
0 Téléchargements

Partager

Gmail Facebook X LinkedIn More