The relationship between risk and incentives in franchise contracting is still an unsolved issue in the literature. According to the standard principal-agent model, a trade-off emerges between the franchisee's protection against risk and incentive motivation. Contrary to this traditional view,...

Within the context of expected utility and in a discrete loss setting, we provide a complete account of the demand for insurance by strictly-risk averse agents and risk-neutral firms when they enjoy limited liability. When exposed to a bankrupting, binary loss and under actuarially fair prices,...

Rather than taking on more risk, US insurers hit hard by the crisis pulled back from risk taking, relative to insurers hit less hard by the crisis. Capital requirements alone do not explain this risk reduction: insurers hit hard reduced risk within assets with identical regulatory treatment....