TY  - RPRT
        AU  - Englmaier, Florian
AU  - Wambach, Achim
        TI  - Optimal Incentive Contracts under Inequity Aversion
        PY  - 2005/Jun/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1643
        UR  - https://www.iza.org/publications/dp1643
        AB  - We analyze the Moral Hazard problem, assuming that agents are inequity averse. Our results differ from conventional contract theory and are more in line with empirical findings than standard results. We find: First, inequity aversion alters the structure of optimal contracts. Second, there is a strong tendency towards linear sharing rules. Third, it delivers a simple rationale for team based incentives in many environments. Fourth, the Sufficient Statistics Result is violated. Dependent on the environment, optimal contracts may be either overdetermined or incomplete.
        KW  - inequity aversion
KW  - sufficient statistics result
KW  - incentives
KW  - linear contracts
KW  - contract theory
KW  - incomplete contracts
        ER  -