November 15, 2011 In many moral hazard problems, an agent may manipulate the information that the principal observes. This type of fraud has attracted widespread attention in executive performance pay manipulation and public medical insurance fraud. However, fraud is possible but conspicuously absent in many other markets. For example, websites may defraud advertisers by inserting fake clicks o...

Morally motivated individuals behave more cooperatively than predicted by standard theory. Hence, if a firm can attract workers who are strongly motivated by ethical concerns, moral hazard problems like shirking can be reduced. We show that employers may be able to use the firm’s corporate social responsibility profile as a screening device to attract more productive workers. Both pooling and s...

The growing prominence of restorative justice interventions necessitates a reconceptualization of criminal justice in terms of a new paradigm. The most plausible candidate for this is an empowerment paradigm of justice. However, an overarching theory of criminal justice in these terms needs to be complemented by more fine-grained theoretical explanations of how and why conventional and alternat...

Empathy’s role in moral judgment has not received as much attention as its role in moral motivation. Yet given that emotions have at least a causal influence on moral belief, it is plausible that empathy makes an important difference. However, critics like Jesse Prinz point to empathy’s inherent partiality and limitations as reasons to think that it has only a limited explanatory role and that ...

When a principal and an agent operate with simple contracts, in equilibrium, renegotiation will occur after the agent takes her action. Since renegotiation makes incentive contracts non-credible, the principal may prefer non-renegotiable monitoring options. The current literature does not fully reconcile these predictions with the observation of simple, non-renegotiated incentive contracts. We ...

We consider a model of insurance and collusion. EÆcient risk sharing requires the consumer to get a monetary compensation in case of a loss. But this in turn implies consumer-provider collusion incentives to submit false claims to the insurer. We assume, however, that only some providers are collusive while some are honest, and determine the optimal contract specifying the treatment, the insura...

We study the moral hazard problem with general constraints on how little or much the agent can be paid as a function of output. We provide a characterization and existence result using only very simple methods. In the dual problem of minimizing costs for a given effort level, a constraint that harms the principal will always result in a contract that pays according to the constraint on some ran...

Recently, many critics have argued that disgust is a morally harmful emotion, and that it should play no role in our moral and legal reasoning. Here we defend disgust as a morally beneficial moral capacity. We believe that a variety of liberal norms have been inappropriately imported into both moral psychology and ethical studies of disgust: disgust has been associated with conservative authors...

This paper considers the optimal contract when the current (hidden) action of an agent has a persistent effect on the future outcome. In this setting, the current outcome is not only a signal of the current action taken by the agent, but also conveys information about his past actions. The optimal contract in a two-effort choice, two-period setting is characterized analytically and numerically....

We analyse a simple model of dynamic moral hazard in which there is a clear and tractable trade-off between static and dynamic incentives. In our model, a principal wants an agent to complete a project. The agent undertakes unobservable effort, which affects in each period the probability that the project is completed. We characterise the contracts that the principal sets, with and without comm...