Insurance and Information: Firms as a Commitment Device
AbstractWe explore the role of firms in insuring risk-averse workers. As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the spot market if workers are sufficiently risk averse and the firm can base incentive payments on good information. Competition, however, may allow the spot market and explicit contracts to crowd out implicit insurance provided by the firm, even though the latter yields higher welfare. We explain why different governance structures coexist in quite homogeneous industries.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3441.
Date of creation: Jul 2002
Date of revision:
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Other versions of this item:
- Bovenberg, A.L. & Teulings, C.N., 2002. "Insurance and Information: Firms as a Commitment Device," Discussion Paper 2002-36, Tilburg University, Center for Economic Research.
- A.L. Bovenberg & Coen N. Teulings, 2001. "Insurance and Information: Firms as a Commitment Device," Tinbergen Institute Discussion Papers 01-020/3, Tinbergen Institute.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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