Les Cahiers de Recherche - HEC Paris
Competitive Equilibrium with moral hazard in Economies with multiple commodities
Abstract: We study an economy with competitive commodity markets and
exclusive pairwise contractual relations with moral hazard, where both the
principal and the agent can be risk averse. We show existence of equilibria
and their generic constrained suboptimality, by means of a change in the
compensation schemes. Such suboptimality occurs provided the number of
commodities is sufficiently large relative to the number of states and pair
types, and there are at least three future states of the world.
Keywords: General equilibrium; moral hazard; constrained suboptimality; (follow links to similar papers)
JEL-Codes: D51; D52; D82; (follow links to similar papers)
38 pages, January 2, 2000
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Design Joakim Ekebom