Competitive Equilibrium with Moral Hazard in Economies with Multiple Commodities
AbstractWe study an economy with competitive commodity markets and exclusive pairwise contractual relations with moral hazard, where both the principal and the agent can be risk averse. We show existence of equilibria and their generic constrained suboptimality, by means of a change in the compensation schemes. Such suboptimality occurs provided the number of commodities is sufficiently large relative to the number of states and pair types, and there are at least three future states of the world.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 700.
Length: 38 pages
Date of creation: 01 Jan 2000
Date of revision:
General equilibrium; moral hazard; constrained suboptimality;
Find related papers by JEL classification:
- D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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