Das zweite Kapitel untersucht das Risk Shifting von Banken und identifiziert eine pekuniäre Externalität, welche makroprudenzielle Regulierung erfordert. Diese Externalität führt selbst dann zu einer ineffizienten Marktallokation, wenn der Einlagezins das Insolvenzrisiko der Bank korrekt...

It is well known that public or pooled insurance coverage can induce a form of ex-ante moral hazard: people make inefficiently low investments in self-protective activities. This paper points out another ex-ante moral hazard that arises through an induced innovation externality. This alternative...

As an empirical example of this externality, we analyze the innovation induced by the obesity epidemic. Obesity is associated with an increase in the incidence of many diseases. The induced innovation hypothesis is that an increase in the incidence of a disease will increase technological...

Consider a principal-agent relationship in which more effort by the agent raises the likelihood of success. Does rewarding success, i.e., paying a bonus, increase effort in this case? I find that bonuses have not only an incentive but also an income effect. Overall, bonuses paid for success may...