2021 Fiscal Year Annual Research Report
A long-term contract with a possibility of dismissal
| Project/Area Number |
18K12813
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| Research Institution | Kobe University |
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Principal Investigator |
佐藤 愛 神戸大学, 経済経営研究所, ジュニアリサーチフェロー (20813471)
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| Project Period (FY) |
2018-04-01 – 2022-03-31
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| Keywords | Dismissal contract / Long-term contract / Diversion cost |
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| Outline of Annual Research Achievements |
This article develops a multitask agency model in which the agent has to make investments for producing both contractible output and noncontractible intermediate input in a dynamic framework when the principal can fire the agent in the long-term wage contract.
The model predicts that if the diversion cost for the principal is sufficiently small, the principal prefers the long-term wage contract without firing rather than the short-term wage contract or the long-term wage contract with firing.
However, if the diversion cost for the principal becomes larger, the principal may be more likely to prefer the short-term wage contract or the long-term wage contract with firing. Furthermore, if the agent's bargaining power increases, the more likely the long-term wage contracts are chosen.
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