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Pooling promises with moral hazard

Author

Listed:
  • Catarina Goulão

    (Toulouse School of Economics (GREMAQ, INRA))

  • Luca Panaccione

    (DEDI and CEIS, Università degli Studi di Roma "Tor Vergata")

Abstract

We extend the framework of Dubey and Geanakoplos (2002) to the case of moral hazard. We analyze the equilibrium properties of the model and we show that equal ex-ante consumers may choose to promise differently, and, as a consequence, choose different actions. This illustrates how the pool of voluntary promises can induce redistribution from consumers with high expected endowment to those with low expected endowment.

Suggested Citation

  • Catarina Goulão & Luca Panaccione, 2015. "Pooling promises with moral hazard," Economics Bulletin, AccessEcon, vol. 35(1), pages 460-465.
    • Handle: RePEc:ebl:ecbull:eb-14-00093
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    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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