American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Risk-Taking and Risk-Sharing Incentives under Moral Hazard
American Economic Journal: Microeconomics
vol. 6,
no. 1, February 2014
(pp. 58–90)
Abstract
This paper explores the effect of moral hazard on both risk-taking and informal risk-sharing incentives. Two agents invest in their own project, each choosing a level of risk and effort, and share risk through transfers. This can correspond to farmers in developing countries, who share risk and decide individually upon the adoption of a risky technology. The paper mainly shows that the impact of moral hazard on risk crucially depends on the observability of investment risk, whereas the impact on transfers is much more utility dependent.Citation
Belhaj, Mohamed, Renaud Bourlès, and Frédéric Deroïan. 2014. "Risk-Taking and Risk-Sharing Incentives under Moral Hazard." American Economic Journal: Microeconomics, 6 (1): 58–90. DOI: 10.1257/mic.6.1.58Additional Materials
JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D82 Asymmetric and Private Information; Mechanism Design
- D86 Economics of Contract: Theory
- G22 Insurance; Insurance Companies; Actuarial Studies
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