97 An Agents Preferences and the principals Incentive Cost in the Agency Problem
- Jin Yong Jung
- ［No. 97］ 정진용, 박사후연구원(경제학부BK21플러스).pdf
Abstract
We provide the general results about the question of what e ects the change of an
agents preferences over income and e ort has on a risk-neutral principals incentive
cost. We argue that there are two factors a ecting the principals incentive cost. One
is the agents risk aversion and the other is his incentive sensitivity. We show that the
increase in the agents risk aversion or the decrease in his incentive sensitivity leads to
the increase in the principals incentive cost. And, we show that it is possible that the
principal prefers the more risk averse agent.