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Double-Sided Moral Hazard and the Nature of Share Contracts
Open accessAbstract
Contractual arrangements involving revenue/profit sharing are often based on fairly simple, often linear, rules. In addition, in many contexts these contracts are not finely adjusted to the particular circumstances of individual agents or markets, nor do they vary over time to the extent current theories based on optimal contracting suggest they should. We develop a simple model of such revenue- or profit-sharing arrangements based on double-sided moral hazard and show that this model can account for many of these stylized facts. More specifically, the model shows that linear contracts can be optimal and that benefits from customizing terms can, in some cases, be quite limited, if not zero.
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Citations
Cited by
Blair, R. D., & Lafontaine, F. (2005) · doi:10.1017/cbo9780511753879 · Cited by 364
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Weber, T. A. (2014) · Journal of Management Information Systems · doi:10.1080/07421222.2014.995520 · Cited by 233
How Do Franchise Contracts Evolve? A Study of Three German SMEs*
Cochet, O., & Garg, V. K. (2008) · Journal of Small Business Management · doi:10.1111/j.1540-627x.2007.00236.x · Cited by 72
International Franchising Practices in Mexico: Do Franchisors Customize Their Contracts?
Lafontaine, F., & Oxley, J. E. (2004) · Journal of Economics & Management Strategy · doi:10.1111/j.1430-9134.2004.00005.x · Cited by 69
Self-citationReciprocity and incentive pay in the workplace
Dur, R., Non, A., & Roelfsema, H. (2010) · Journal of Economic Psychology · doi:10.1016/j.joep.2010.05.001 · Cited by 50
Contractual Design as a Determinant of Performance: Evidence from Franchising
Chaudey, M., & Fadairo, M. (2008) · International Journal of the Economics of Business · doi:10.1080/13571510701830556 · Cited by 19
Metadata
- Authors
- Bhattacharyya, S., & Lafontaine, F.
- Venue
- The RAND Journal of Economics
- Publisher
- Wiley
- Published
- 1995
- Volume
- 26
- Issue
- 4
- Pages
- 761
- ISSN
- 0741-6261 (ISSN-L)
- OpenAlex
- W2087110418
- Cited by
- 537
- References
- 0
- FWCI
- 19.10
- Type
- journal article
- Language
- en
- Open access
- green
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