Buffa, Andrea M and Liu, Qing and White, Lucy (2024). Privacy and Team Incentives

This research provides a model that gives novel predictions for the structure of banking syndicates.”Real world contracts are typically private, observed only by their direct signatories, so agents working together are vulnerable to the principal opportunistically reducing other agents’ incentives. The principal can mitigate this commitment problem by giving the most skilled agent a budget and delegating authority to write other agents’ contracts. This endogenous hierarchy, never optimal with public contracts, raises effort, output, and compensation, but allows rent extraction.”(Journal of Finance, Forthcoming). Read the publication, Privacy and Team Incentives in the Journal of Finance, Forthcoming, here.

This publication was written by Buffa, Andrea M., Qing Liu, & Lucy White.