www.coalitiontheory.net
Published on www.coalitiontheory.net (http://coalitiontheory.net)

Home > Moral Hazard: Base Models and Two Extensions

Moral Hazard: Base Models and Two Extensions

Working paper
Author/s: 
Inés Macho-Stadler and David Pérez-Castrillo
Issue number: 
883
Series: 
Barcelona GSE Working Papes
Publisher: 
Barcelona Graduate School of Econoomics
Year: 
2016
Working Paper [1]
We analyze the optimal contract in static moral hazard situations, where the agent’s effort is not veri…able. We fi…rst present the main trade-offs of the principal-agent model. We cover the trade-off of incentives (motivation) vs. risk-sharing (efficiency), incentives vs. rents (when the agent is protected by limited liability), incentives to a task vs. incentives to another (in a multitask situation), and incentives to the agent vs. incentives to the principal (when both exert a non-veri…able effort). Then, we discuss two recent extensions: how incorporating behavioral biases in the analysis of incentives affects the predictions of the classical moral hazard model, and the insertion of the principal-agent problem in a matching market.
Tags: 
Matching [2]

Source URL:http://coalitiontheory.net/content/moral-hazard-base-models-and-two-extensions

Links
[1] http://research.barcelonagse.eu/file/4897/download?token=WDOCLKDt [2] http://coalitiontheory.net/research-areas/matching