On multiple agent models of moral hazard

In multiple principal, multiple agent models of moral hazard, we provide conditions under which the outcomes of equilibria in direct mechanisms are preserved when principals can offer indirect communication schemes. We discuss the role of random allocations and recommendations and relate the result to the existing literature.Moral Hazard, Multiple Agents, Direct Mechanism.

Governance Issues in the Principal-Agent Framework: Producing Cellulosic Ethanol in Michigan

This article analyzes the incentives and compensation problems faced by cellulosic ethanol producer and logging firms and the consequent impact on the organization of the wood based cellulosic ethanol industry in the US. The success of this relationship is central to setting up the biofuel industry in Michigan and in the US at large. The theoretical results indicate that specification contract under the principal-agent framework is of limited utility due to’ metering’ problem when the principal contracts with multiple agents for the supply of feedstock.. Alternative arrangements including JVs have the potential to provide close to first best solutions.Principal-Agent, Cellulosic Ethanol, Michigan, Multiple agents, Asymmetric Information, Agribusiness, Institutional and Behavioral Economics, Resource /Energy Economics and Policy, D82, D86, L23, L24, Q42,

Moral Hazard and Ambiguity

We consider a principal-agent model with moral hazard where the agent’s knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures. That is, the Informativeness Principle does not hold in our model. These results stand in stark contrast to the ones of the orthodox theory, but are empirically of high relevance.financial crisis, Basel Accord, banking regulation, capital requirements, modelbased approach, systemic risk

A primer on moral-hazard models

Bank supervision

The Intensity of Incentives in Firms and Markets: Moral Hazard with Envious Agents

While most market transactions are subject to strong incentives, transactions within firms are often not incentivized. We offer an explanation for this observation based on envy among agents in an otherwise standard moral hazard model with multiple agents. Envious agents suffer if other agents receive a higher wage due to random shocks to their performance measures. The necessary compensation for expected envy renders incentive provision more expensive, which generates a tendency towards flat-wage contracts. Moreover, empirical evidence suggests that social comparisons like envy are more pronounced among employees within firms than among individuals who interact only in the market. Flat-wage contracts are thus more likely to be optimal in firms than in markets

Structural estimation of a principal-agent model: moral hazard in medical insurance

Despite the importance of principal-agent models in the development of modern economic theory, there are few estimations of these models. I recover the estimates of a principal-agent model and obtain an approximation to the optimal contract. The results show that out-of-pocket payments follow a concave profile with respect to costs of treatment. I estimate the welfare loss due to moral hazard, taking into account income effects. I also propose a new measure of moral hazard based on the conditional correlation between contractible and noncontractible variables

A note on Common Agency models of moral hazard

We consider Common Agency games of moral hazard and we suggest that there is only a very weak support for the standard restriction to take-it or leave-it contracts.Menus, Common Agency.

Strategic Interaction and Donor Policy Determination in a Domestic Setting

aid effectiveness, political processes, endogenous policy formation

A PRINCIPAL-AGENT APPROACH TO THE DELEGATION OF REGULATORY AUTHORITY

This paper applies a multi-tasking model of moral hazard to study the delegation of regulatory authority for health and environmental risks. The model characterizes the conditions under which single and multiple bureaucratic agencies are optimal, and relates these findings to discussions of appropriate regulation of agricultural biotechnologyPolitical Economy,