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Moral hazard with non-additive uncertainty: When are actions implementable?

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  • Dumav, Martin
  • Khan, Urmee

Abstract

We provide sufficient conditions on the information structure for implementing actions in a moral hazard setting when Agent has non-probabilistic uncertainty. For a finite action space, under three well-known formulations of Agent’s ambiguity attitude, contracts that partition the outcome space in two parts, and are piecewise constant on each part, are enough to implement an action.

Suggested Citation

  • Dumav, Martin & Khan, Urmee, 2018. "Moral hazard with non-additive uncertainty: When are actions implementable?," Economics Letters, Elsevier, vol. 171(C), pages 110-114.
    • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:110-114
    DOI: 10.1016/j.econlet.2018.06.028
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    References listed on IDEAS

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    Cited by:

    1. Martin Dumav, 2021. "Moral Hazard, Dynamic Incentives, and Ambiguous Perceptions," Papers 2110.15229, arXiv.org.

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    More about this item

    Keywords

    Moral hazard; Non-probabilistic uncertainty; Ambiguity aversion; Implementability;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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