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Optimal delegated search with adverse selection and moral hazard

Ulbricht, Robert - In: Theoretical economics : TE ; an open access journal in … 11 (2016) 1, pp. 253-278

The paper studies a model of delegated search. The distribution of search revenues is unknown to the principal and has to be elicited from the agent in order to design the optimal search policy. At the same time, the search process is unobservable, requiring search to be self-enforcing. The two...

Persistent link: https://www.econbiz.de/10011672191

Characterization and uniqueness of equilibrium in competitive insurance

Luz, Vitor Farinha - In: Theoretical economics : TE ; an open access journal in … 12 (2017) 3, pp. 1349-1391

This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz's (1976) model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions...

Persistent link: https://www.econbiz.de/10011744297

Robust performance evaluation of independent agents

Kambhampati, Ashwin - In: Theoretical economics : TE ; an open access journal in … 19 (2024) 3, pp. 1151-1184

A principal provides incentives for independent agents. The principal cannot observe the agents' actions, nor does she know the entire set of actions available to them. It is shown that an anti-informativeness principle holds: very generally, robustly optimal contracts must link the incentive...

Persistent link: https://www.econbiz.de/10014635410

Robust contracting under common value uncertainty

Auster, Sarah - In: Theoretical economics : TE ; an open access journal in … 13 (2018) 1, pp. 175-204

A buyer makes an offer to a privately informed seller for a good of uncertain quality. Quality determines both the seller's valuation and the buyer's valuation, and the buyer evaluates each contract according to its worst-case performance over a set of probability distributions. This paper...

Persistent link: https://www.econbiz.de/10011855861

Surprise and default in general equilibrium

Teeple, Keisuke - In: Theoretical economics : TE ; an open access journal in … 18 (2023) 4, pp. 1547-1583

I model an incomplete markets economy where unaware agents do not perceive all states of nature, so unintended default … can occur when asset returns differ from what was perceived. The presence of default plays a crucial role in the proof of … delivery-adjusted asset returns. The First Fundamental Welfare Theorem fails because of default and pecuniary inefficiencies …

Persistent link: https://www.econbiz.de/10014440081

Incomplete markets with no Hart points

Anderson, Robert M.; Raimondo, Roberto C. - In: Theoretical economics : TE ; an open access journal in … 2 (2007) 2, pp. 115-133

We provide a geometric test of whether a general equilibrium incomplete markets (GEI) economy has Hart points---points at which the rank of the securities payoff matrix drops. Condition (H) says that, at each nonterminal node, there is an affine set (of appropriate dimension) that intersects all...

Persistent link: https://www.econbiz.de/10011702592

Sustainable debt

Bloise, Gaetano; Polemarchakis, Heraklis M.; Vailakis, Y. - In: Theoretical economics : TE ; an open access journal in … 16 (2021) 4, pp. 1513-1555

We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the...

Persistent link: https://www.econbiz.de/10012806557

Ergodic Markov equilibrium with incomplete markets and short sales

Braido, Luis H. B. - In: Theoretical economics : TE ; an open access journal in … 8 (2013) 1, pp. 41-57

This paper studies recursive exchange economies with short sales. Agents maximize discounted expected utility. The asset structure is general and includes real securities, infinite-lived stocks, options, and other derivatives. The main result shows the existence of a competitive equilibrium...

Persistent link: https://www.econbiz.de/10011689003

The no-upward-crossing condition, comparative statics, and the moral-hazard problem

Chade, Hector; Swinkels, Jeroen M. - In: Theoretical economics : TE ; an open access journal in … 15 (2020) 2, pp. 445-476

We define and explore the No-Upward-Crossing NUC, a condition satisfied by every parameterized family of distributions commonly used in economic applications. Under smoothness assumptions, NUC is equivalent to log-supermodularity of the negative of the derivative of the distribution with respect...

Persistent link: https://www.econbiz.de/10012308408

Simple contracts with adverse selection and moral hazard

Gottlieb, Daniel; Moreira, Humberto - In: Theoretical economics : TE ; an open access journal in … 17 (2022) 3, pp. 1357-1401

We study a principal-agent model with moral hazard and adverse selection. Risk-neutral agents with limited liability have arbitrary private information about the distribution of outputs and the cost of effort. We show that under a multiplicative separability condition, the optimal mechanism...

Persistent link: https://www.econbiz.de/10013327130