Visible to the public Economics and CPS Seminar minicourse: Moral HazardConflict Detection Enabled

May 11, 2016
Living with Info Asymmetries: Moral Hazard


I will cover the effects of moral hazard [MH] (ex post hidden action) on equilibria. I will generalize Myerson's MH game 1 (slide #43) to demonstrate how agency theory can be useful for real life problems. I will analyze the case of VW emissions tests (as promised on slide #61). Then, I will introduce MH in the context of risk transfer (insurance contract design), and discuss how MH affects viable insurance contracts, and risk levels.

References:
1. R. Winter. Optimal Insurance under Moral Hazard. 9:205 - 230, 2013.
2. Arnott, R., & Stiglitz, J. E. Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out of Peer Monitoring?. The American Economic Review, 81(1), 179 - 190. 1991.
3. Myerson, R. B. Perspectives on Mechanism Design in Economic Theory. The American Economic Review, 98(3), 586603. 2008.


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