Technological choice by a principal is added to the standard moral hazard model. It is argued that this is an important margin of choice. Two examples are provided in which the choice has significant implications. In one it drastically simplifies the optimal contract. In the other, it...

It is commonly thought that risk-based deposit insurance premiums can control the moral hazard inherent in deposit insurance. That view is wrong; other devices — such as state-contingent payments and supervisory exams — are needed as well