On Joint Incentive Contracts Under Horizontal Monitor
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Abstract:
According to the problem that the independent incentive contracts relying on one's own output,which is given out by classical principalagent theory,only can realize the second best efforts,this paper analyzes the optimal contract under horizontal monitor by which independent agents can monitor each other,and comes to the conclusion that the joint incentive contracts relying on one's own output and others' can realize the first best efforts under horizontal monitor.The independent agents can sign implicit side contracts among them by the horizontal monitor and the dynamic joint incentive contracts,in which strict team incentive compatibility contracts are taken at the first stage and individual incentive compatibility contracts are taken at the second stage,make the retaliation mechanism regulated by implicit side contracts among agents feasible and credible,and hence can realize optimal incentives.
