Intertemporal cost dependence in the presence of managerial impatience
A multi-period agency problem arising in the presence of intertemporal cost dependence is investigated. The principal delegates production decisions to a manager who is impatient. The manager has private information on the nature of cost dependence that takes the form of an experience effect. Since...
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| Veröffentlicht in: | Journal of economic behavior & organization 1993, Vol.20 (1), p.23-47 |
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| container_title | Journal of economic behavior & organization |
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| creator | Darrough, Masako N. Stoughton, Neal M. |
| description | A multi-period agency problem arising in the presence of intertemporal cost dependence is investigated. The principal delegates production decisions to a manager who is impatient. The manager has private information on the nature of cost dependence that takes the form of an experience effect. Since the impatient manager would not invest enough to gain experience, the principal designs a second-best scheme to motivate the manager to increase intertemporal profit for the firm. The second best scheme is obtained as a direct revelation mechanism that specifies outputs (prices) as well as the manager's compensation. A significant result is that unlike the first-best case, impatience is not necessarily a disadvantage with asymmetric information. Impatience can be exploited to reduce the manager's information rent resulting in preferred outcomes for the principal. |
| doi_str_mv | 10.1016/0167-2681(93)90079-5 |
| format | Article |
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| ispartof | Journal of economic behavior & organization, 1993, Vol.20 (1), p.23-47 |
| issn | 0167-2681 1879-1751 |
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| source | RePEc; Elsevier ScienceDirect Journals; Periodicals Index Online; Applied Social Sciences Index & Abstracts (ASSIA) |
| subjects | Costs Decision making Economic models Economic theory Impacts Management Managers Profit maximization Short term |
| title | Intertemporal cost dependence in the presence of managerial impatience |
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