Under contingent fees the attorney gets a share of the judgment; under conditional fees he gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a framework where lawyers choose between a safe and a risky...

We examine the effects of ex post revelation of information about the risk type or the risk-reducing behavior of insureds in automobile insurance markets both for perfect competition and for monopoly. Specifically, we assume that insurers can offer a contract with information revelation ex post,...

Contract-relevant information asymmetries are known to cause inefficien-cies in markets. The information asymmetry is largest in the beginning of the customer-insurer relationship but reduces over time; the longer a poli-cyholder stays with the insurer the more the insurer learns about the...

This chapter, originally written as a consequence of the terrorist attacks of September 11, 2001, provides an elementary, everyday introduction to the concepts of risk and insurance. Conceptually, risk has two dimensions: a potential loss, and the chance of that loss being realized. People can,...

This paper evaluates the trade-off between the advantages of risk sharing and the perils of common pool problems in federal fiscal arrangements. Under the assumption of asymmetric information we evaluate two alternative regimes of intergovernmental transfers. In one regime, the central...

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...

This paper proposes a historically-grounded mechanism-design model of corporate finance, with two-side risk aversion under limited contract enforceability, where (inside) equity held by entrepreneurs, debt and (outside) equity coexist. This capital structure shares optimally the...

We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity...

We consider physicians with fixed capacity levels. If a physician's capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she may undertreat, i.e., she may not provide necessary...