Supervisory Information and Loss Aversion
Dongsoo Shin and Sungho Yun
Abstract:
This study examines the optimality of allowing corrupt interactions (bribery, framing and extortion) between the supervisor and the agent when the agent is loss averse. We show that although inducing bribery leads to effective usage of the supervisory information, preventing all corrupt interactions between the supervisor and the agent by disregarding some of supervisory information can be optimal.
Jun 10, 2021