The paper studies insurance with moral hazard in a system of contingent-claims markets. Insurance buyers are modelled as Cournot monopolists or oligopolists. The other agents condition their expectations on market prices, as in models of rational-expectations equilibrium with asymmetric...

This paper provides a non-steady state general equilibrium foundation for the transactions demand for money going back to Baumol (1952) and Tobin (1956). In our economy, money competes against real capital as a store of value. We prove existence of a monetary general equilibrium in which both...

We propose a new approach to the normative analysis of public-good provision. In addition to individual incentive compatibility, we impose conditions of robust implementability and coalition proofness. Under these additional conditions, participants' contributions can only depend on the level of...

We study a dynamic model of team production with moral hazard. We show that the players begin to invest effort only shortly before the time limit when the reward for solving the task is shared equally. We explore how the team can design contracts to mitigate this form of procrastination and show...

We modify the principal-agent model with moral hazard by assuming that the agent is expectation-based loss averse according to Köszegi and Rabin (2006, 2007). The optimal contract is a binary payment scheme even for a rich performance measure, where standard preferences predict a fully...

By using general information structures and precision criteria based on the dispersion of conditional expectations, we study how oligopolists’ information acquisition decisions may change the effects of information sharing on the consumer surplus. Sharing information about individual cost...

We consider a principal-agent model with moral hazard where the agent’s knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures....

Should principals explain and justify their evaluations? Suppose the principal's evaluation is private information, but she can provide justication by sending a costly cheap-talk message. If she does not provide justication, her message space is restricted, but the message is costless. I show...

Should government be allowed to spend tax payers’ money on public relations? If one frames the question that way, the negative answer suggests itself. Yet government communication serves more purposes. These purposes may be analysed in terms of behavioural economics and psychology. In moral...