The Truth About Moral Hazard and Adverse Selection
نویسندگان
چکیده
منابع مشابه
Disentangling Moral Hazard and Adverse Selection
This paper analyzes a canonical principal-agent problem with moral hazard and adverse selection. The agent is risk averse and has private information about his disutility of taking an unobservable action. The principal is risk neutral and designs a menu of contracts consisting of a compensation scheme and a recommended action for each type of agent to maximize expected profit. We first derive a...
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We study a principal-agent model with moral hazard and adverse selection. Agents have private information about the distribution of outcomes conditional on each effort. We characterize the solution of the resulting multidimensional screening problem, and establish several general properties. A positive mass of types with low conditional probabilities of success gets a constant payment and zero ...
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We study how seller exit and continuing sellers’ behavior on eBay are affected by an improvement in market transparency. The improvement was achieved by reducing strategic bias in buyer ratings. It led to a significant increase in buyer satisfaction with seller performance, but not to an increase in seller exit. When sellers had the choice between exiting—a reduction in adverse selection—and im...
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The size of adverse selection and moral hazard effects in health insurance markets has important policy implications. For example, if adverse selection effects are small while moral hazard effects are large, conventional remedies for inefficiencies created by adverse selection (e.g., mandatory insurance enrolment) may lead to substantial increases in health care spending. Unfortunately, there i...
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We consider project financing under adverse selection and moral hazard and derive several interesting results. First, we provide an explanation of why good firms issue both debt and underpriced equity (even if the bankruptcy and agency costs of debt are zero). Second, we show that, in the presence of moral hazard, adverse selection may induce the conversion of negative into positive NPV project...
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ژورنال
عنوان ژورنال: SSRN Electronic Journal
سال: 2007
ISSN: 1556-5068
DOI: 10.2139/ssrn.1822442