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Moral Hazard and Verifiability: The Effects of Renegotiation in Agency
Open accessAbstract
The authors examine the effects of renegotiation in an agency relationship. They show how renegotiation affects (1) the set of actions the principal can induce the agent to take and (2) the cost of implementing a given action. The authors show that, when the principal receives an unverifiable signal of the agent's action, renegotiation can improve welfare. This result stands in contrast to earlier findings that renegotiation lowers welfare when the principal receives no signal about the agent's action prior to renegotiation. Copyright 1991 by The Econometric Society.
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Citations
Cited by
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Hart, O. (1995) · doi:10.1093/0198288816.001.0001 · Cited by 4,672
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Armstrong, C. S., Guay, W. R., & Weber, J. P. (2010) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2010.10.001 · Cited by 1,494
Algorithmic monoculture and social welfare
(2023) · The Societal Impacts of Algorithmic Decision-Making · doi:10.1145/3603195.3603202
Metadata
- Authors
- Hermalin, B. E., & Katz, M. L.
- Venue
- Econometrica
- Publisher
- JSTOR
- Published
- 1991-11
- Volume
- 59
- Issue
- 6
- Pages
- 1735
- ISSN
- 0012-9682 (ISSN-L)
- OpenAlex
- W3124209791
- Cited by
- 243
- References
- 0
- FWCI
- 8.48
- Type
- journal article
- Language
- en
- Open access
- bronze
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- CoChat. (2026). Citation check: Moral Hazard and Verifiability: The Effects of Renegotiation in Agency. https://app.cochat.ai/papers/10.2307/2938287
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- Hermalin, B. E., & Katz, M. L. (1991). Moral Hazard and Verifiability: The Effects of Renegotiation in Agency. Econometrica. https://doi.org/10.2307/2938287
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
