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.

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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