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The Effect of Contract Theory on the Maximum Profit of Iran Tier Company: a Reassessment
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Abstract: (4405 Views) |
| Information asymmetry is one of the important reasons that lead to be inappropriate decision-making by economic agents in the market. Shaeri et al (2016) in their study about the role of Contract Theory on the maximum profit in Iran Tier company, showed that contract theory under the asymmetric information condition and with strong assumptions on production and cost functions as well as parameters in the model, cause just 10 percent difference between the maximum profit under asymmetric and symmetric information conditions. This study as a reassessment of the aforementioned paper, by weakening its assumptions shows that by a well-behaved form of cost and production functions, for all possible values of parameters, the difference between maximum benefit under asymmetric and symmetric information conditions -except in some special cases- in all equilibriums is under 10 percent. So, by ignoring the strong assumptions in the aforementioned paper, we can still show the importance of implementing Contract Theory in the maximum profit of Iran Tier Company. |
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| Keywords: Contract Theory, maximizing the profit firm. |
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Full-Text [PDF 859 kb]
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Type of Study: Research |
Subject:
Special
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