The theory of incentives and matching theory can complement each other. In particular, matching theory can be a tool for analyzing optimal incentive contracts within a general equilibrium framework. We propose several models that study the endogenous payoffs of principals and agents as a...

The paper shows that an IMF-like coinsurance arrangement among countries can play a useful role in the global financial system. The operation of the coinsurance arrangement is examined under different loan contracts. It shows that, if the IMF?s objective is to safeguard its resources and be...

Government provision of a financial safety net for financial institutions has been a key element of the policy response to the current crisis, with governments extending existing guarantees and introducing new ones. These measures have been helpful in avoiding a further accelerated loss of...

The paper argues that a comprehensive activation strategy is called for - in both unemployment and disability insurance - to minimize the conflict between income insurance and work incentives and to prevent the economic crisis from causing a long-lasting decline in labor force participation. A...

This article analyses the optimal punishment structure set by a regulator in banking markets under asymmetric information. Relying on a theoretical model, we analyse whether a decreasing, constant, or increasing sanction scheme deters potentially repeated offences in banking. We find that an...

This study has two objectives, first, to investigate if the lending behaviour of banks exhibits moral hazard in the Indian Banking Industry, and second, to investigate whether banks' moral hazard behaviour changes when the systemic importance of the banks is taken into consideration. We studied...

Background: Compared with the number of studies performed in the United States, few studies have been conducted on the link between health insurance and healthcare consumption in Europe, likely because most European countries have compulsory national health insurance (NHI) or a national health...

In this paper, I analyze the effectiveness of different capital regulations in mitigating the effects of moral hazard that exists only for systemically important banks. Leverage restrictions have the potential to reduce the fraction of banks that are systemically important but do not mitigate...

Public reputation mechanisms are an effective means to limit opportunistic behavior in markets suffering from moral hazard problems. While previous research was mostly concerned with the influence of exogenous feedback mechanisms, this study considers the endogenous emergence of reputation...

Moral hazard in an organization occurs when people make decisions and take a high risk for their own benefit, given that they would not have to bear all the negative ensuing consequences should they occur. This risk transferred to third parties is generally due to the catalysts that foster this...