This chapter discusses moral hazard. The principalagent relationship embodies a special form of moral hazard, which can be called one-sided, but moral hazard can also be many-sided. The paradigmatic model of many-sided moral hazard is the partnership in which there are many agents but no...

In a simple model of currency crises caused by creditor coordination failure, we show that bailouts that reduce ex post inefficiency will sometimes create ex ante moral hazard but will sometimes enhance the incentives for governments to take preventative actions. This model helps us understand a...

We study optimal contracting in team settings, featuring stylized aspects of production environments with complex tasks. Agents have many opportunities to shirk, task-level monitoring is needed to provide useful incentives, and because it is difficult to write individual performance into formal...