Renaud Bourlès

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Renaud Bourlès

AMSE
On safeguards and incentives
Co-écrit avec
Dominique Henriet, Bernard Sinclair-Desgagné
Lieu

IBD Amphi

Îlot Bernard du Bois - Amphithéâtre

AMU - AMSE
5-9 boulevard Maurice Bourdet
13001 Marseille

Date(s)
Jeudi 8 juin 2017| 12:30 - 13:45
Contact(s)

Ugo Bolletta : ugo.bolletta2[at]unibo.it
Mathieu Faure : mathieu.faure[at]univ-amu.fr

Résumé

Industrial, business and financial catastrophes often have human causes. In order to prevent such outcomes from occurring, governments, business organizations and individuals a priori invest in risk management rules, processes, technologies, and other safeguards aiming to alleviate the effects of human failures. This paper investigates how these investments combine with the incentive systems set afterwards. We find that, in both the first and the second-best, the agent will be fully insured on the downside: her wealth stays the same ex post, whether a bad or a very bad outcome realizes. We also show that the principal's safeguards investment and the agent's effort are strategic substitutes. These conclusions are subject to change, however, depending on current regulatory constraints (such as limited liability, compensation caps or due diligence requirements) and the agent's endowed wealth.