IDEAS home Printed from https://ideas.repec.org/a/mhr/jinste/urnsici0932-4569(200012)1564_625daravi_2.0.tx_2-u.html
   My bibliography  Save this article

Delegating a Risky Activity via Incentive Contracts and Liability Insurance

Author

Listed:
  • Akihiro Watabe

Abstract

We examine the importance of agents' private information about their accident proneness and action, when the principal delegates via an optimal auction the undertaking of a risky activity to an agent. A unique feature of our model is that the risk-neutral principal can provide, at no cost, competitively priced liability insurance to the 'winning' risk-neutral agent in order to mitigate their expected cost of delegation. We show that the principal's provision of free coverage has a two-sided effect: the social cost of the risky activity increases, while the principal's informational rent payment to the winning agent decreases.

Suggested Citation

  • Akihiro Watabe, 2000. "Delegating a Risky Activity via Incentive Contracts and Liability Insurance," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(4), pages 625-625, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200012)156:4_625:daravi_2.0.tx_2-u
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    JEL classification:

    • D6 - Microeconomics - - Welfare Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K1 - Law and Economics - - Basic Areas of Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mhr:jinste:urn:sici:0932-4569(200012)156:4_625:daravi_2.0.tx_2-u. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Wolpert (email available below). General contact details of provider: https://www.mohrsiebeck.com/jite .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.