DP8241 Repeated moral hazard and contracts with memory: A laboratory experiment

Author(s): Petra Nieken, Patrick W. Schmitz
Publication Date: February 2011
Keyword(s): Laboratory experiment, Repeated moral hazard, Sequential hidden actions
JEL(s): D82, J33
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8241

This paper reports data from a laboratory experiment on two-period moral hazard problems. The findings corroborate the contract-theoretic insight that even though the periods are technologically unrelated, due to incentive considerations principals may prefer to offer contracts with memory.