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The irreversibility effect and agency conflicts

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Abstract

This paper studies the influence of agency conflicts on the irreversibility effect. Using a dynamic variant of the static Baron and Myerson (Econometrica 50(4):911–930, 1982) adverse selection model, we characterize under which circumstances the irreversibility effect arises in the presence and absence of an agency conflict. In particular, we find that in the presence of an agency conflict the irreversibility effect arises in more circumstances than in the standard first-best analysis that abstracts from agency problems.

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Authors and Affiliations

  1. Department of Business Administration, University of Vienna, Brünner Straße 72, 1210, Vienna, Austria

    Clemens Löffler & Thomas Pfeiffer

  2. Department of Taxation, Accounting and Finance, University of Paderborn, Warburgerstraße 100, 33098, Paderborn, Germany

    Georg Schneider

Authors
  1. Clemens Löffler
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  2. Thomas Pfeiffer
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  3. Georg Schneider
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Correspondence to Thomas Pfeiffer.

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Löffler, C., Pfeiffer, T. & Schneider, G. The irreversibility effect and agency conflicts. Theory Decis 74, 219–239 (2013). https://doi.org/10.1007/s11238-012-9331-6

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  • DOI: https://doi.org/10.1007/s11238-012-9331-6

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