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338: Moral Hazard and Limited Liability: The Real Effects of Contract Bargaining. 339: New Palgrave Dictionary of Law & Economics Entry: Judgement-Proofness

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  • Pitchford, R.

Abstract

338: I examine the standard assumption in the moral hazard agency literature that the principal has all the bargaining power at the contract offer stage. When the agent has limited liability, as is often the case in practice, the contract changes according to the distribution of bargaining power, and consequently so does the agents effort. --- 339: A party is said to be judgement-proof if she avoids the full degree of liability she should rightly face. There are several ways an individual can do this. Before the case comes to court, and after the accident has been caused, she can expend resources either to deter or to escape court action.

Suggested Citation

  • Pitchford, R., 1998. "338: Moral Hazard and Limited Liability: The Real Effects of Contract Bargaining. 339: New Palgrave Dictionary of Law & Economics Entry: Judgement-Proofness," Papers 338-339, Australian National University - Department of Economics.
    • Handle: RePEc:fth:aunaec:338-339
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    More about this item

    Keywords

    BARGAINING ; CONTRACTS ; MORAL HAZARD ; LAW;
    All these keywords.

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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