Biais, Bruno and Landier, Augustin (2013) Endogenous agency problems and the dynamics of rents. TSE Working Paper, n. 13-423, Toulouse

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While potentially more productive, more complex tasks request more e¤ort, generating larger agency rents. Agents therefore prefer to acquire complex skills, to earn large rents. In our overlapping generations model, their ability to do so is kept in check by competition with predecessors. Old agents, however, are imperfect substitutes for young ones, because the latter are easier to incentivize, thanks to longer horizons. This reduces competition between generations, enabling young managers to go for larger complexity than their predecessors. Consequently, equilibrium complexity and rents gradually increase, especially when agents are patient and turnover limited, so that compensation deferral is very useful to mitigate moral hazard.

Item Type: Monograph (Working Paper)
Language: English
Date: May 2013
Place of Publication: Toulouse
Uncontrolled Keywords: Agency rents, moral hazard, dynamic contracts, complexity
JEL Classification: D3 - Distribution
D8 - Information, Knowledge, and Uncertainty
G2 - Financial Institutions and Services
Divisions: TSE-R (Toulouse), TSM Research (Toulouse)
Institution: Université Toulouse Capitole
Site: UT1
Date Deposited: 09 Jul 2014 17:37
Last Modified: 02 Apr 2021 15:48
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