Firm's inability to monitor employees search efforts results in a tradeoff between risk-bearing and incentive considerations in the design of employment-related insurance. Since the provision of insurance against firm-specific shocks adversely affects workers' incentives to search out better...

This paper shows that, except in certain limiting cases, competitive equilibrium with moral hazard is constrained inefficient. The first section compares the competitive equilibrium and the constrained social optimum in a fairly general model, and identifies six types of market failure. Each of...

The central result of this paper is that when moral hazard is present, shadow prices in general differ from market prices. To remedy this market failure, the government should introduce differential commodity taxation. Moral hazard causes people to take too little care to prevent accidents. The...

This paper examines the existence and properties of competitive equilibrium in economies with moral hazard. The nature of competitive equilibrium depends on whether insurers can observe an insured's total purchases of insurance. If insurers can observe this, an individual will purchase all his...

This paper is the first in a series. Among the results are: 1) Indifference curves between premiums and payouts are not generally quasi-concave; as a result the price- and income-consumption lines are generally not continuous; 2) Accident prevention effort is generally not continuous or monotonic...

A multi-period, general equilibrium labour market model is developed where risk-averse workers face job-related uncertainty and labour turnover is costly. If a worker is unlucky and suffers a bad match, he quits and joins another firm. We assume that the quality of a job match is unobservable; as...