EBSLG

 

 
European Business Schools Librarian's Group
Home About Series Subject/JEL codes Advanced Search
HEC Paris. Research Department Les Cahiers de Recherche - HEC Paris
 

No 699:
Moral hazard and linear contracts : Economies with idiosyncratic risks

Alessandro CITANNA

Abstract: In exchange economies where moral hazard affects the distribution of individual risks, we study the viability of linear nonexclusive contracts. It is shown that the linearity in prices and payoffs is compatible with the presence of moral hazard when coupled with a simple participation fee. More specifically, we prove existence of competitive equilibrium when individuals exchange the contracts. The participation fee can be seen as a form of sharing the profits and losses of an insurance company offering such contracts. The contracts can be given the more general interpretation of financial assets in markets where the unverifiability of trades is widespread. The asset prices are such that financial markets may be "incomplete" at equilibrium.

Keywords: Moral hazard; competitive equilibrium; financial markets; insurance; (follow links to similar papers)

JEL-Codes: C62; D50; D82; G22; (follow links to similar papers)

28 pages, January 1, 2000

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

5ed3f347f9b83002c7127cab6b09c46f.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Sandra Dupouy ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design Joakim Ekebom

Handle: RePEc:ebg:heccah:0699 This page was generated on 2011-04-20 01:13:33