Firms' inability to monitor their employees' search effort forces a tradeoff between risk-bearing and incentive considerations when designing employment-related insurance. Since the provision of insurance against firm-specific shocks adversely affects workers' incentives to find better jobs, the...

This paper develops the basic analytics of moral hazard, for the two-outcome case where either a fixed damage accident occurs or it does not. The analysis focuses on the relationship between the insurance premium paid and the insurance benefits received in the event of an accident, and is...

This paper explores the relationship between aggregate land rents and aggregate transport costs for land markets in which locations differ solely in terms of accessibility. That there exists a relationship between land rents and transport costs has been recognized at least since the time of von...

In this paper, we investigate the descriptive and normative properties of competitive equilibrium with moral hazard when firms offer "price contracts" which allow clients to purchase as much insurance as they wish at the quoted prices. We show that a price equilibrium always exists and is one of...

This paper examines the existence and nature of competitive equilibrium with moral hazard. The more insurance an individual has, the less care will he take. Consequently, insurance firms attempt to restrict their clients' aggregate insurance purchases. If individuals' aggregate insurance...

The central result of this paper is that when moral hazard ispresent,competitive equilibrium is almost always (constrained) inefficient. Moral hazard causes shadow prices to deviate from market prices. To remedy this market failure, the government could introduce differential commodity taxation....

It is by now well-known that, in the presence of moral hazard or adverse selection, randomization of insurance premia and benefits may be Pareto efficient. This paper: i) provides a typology of the various forms that randomization may take; ii) derives necessary and/or sufficient conditions for...