The delegation of monetary policy to a supranational Central Bank creates a conflict of interest between residents of different countries. For example, the country in recession favours more inflation to boost output, while the country in boom prefers exactly the opposite. This conflict gives...

We study incentive-compatible labor contracts in the case where both individual productivity and subjective discount rate are unobservable by the rm. We rst show that unidimensional manifolds of agents group on the same contract. High , low agents may choose the same contract as low , high...

This paper presents a theory for Islamic venture capital namely ‘Mudharabah’ contract under adverse selection problem. In order to avoid selecting a low type entrepreneur for a given good project, the framework defines the profit sharing ratio (PSR) as a screening device. We then develop a...

In this note, we intend to characterize conditions such that adverse selection is irrelevant in health insurance. We show that a condition is that policyholders health status is sufficiently reduced by illness.

We analyze a Principal-Agent model of an insurer who faces an adverse selection problem. He is unable to observe if his client has a high risk or a low risk of having an accident. At the underwriting of the contract, the insurer requests the client to declare his risk. After that, the former can...

This paper presents a theory for Islamic venture capital namely ‘Mudharabah’ contract under adverse selection problem. In order to avoid selecting a low type entrepreneur for a given good project, the framework defines the profit sharing ratio (PSR) as a screening device. We then develop a...

We analyze a standard environment of adverse selection in credit markets. In our environment, entrepreneurs who are privately informed about the quality of their projects need to borrow in order to invest. Conventional wisdom says that, in this class of economies, the competitive equilibrium is...