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Regulation and Altruism

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Abstract

We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent’s effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator’s input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection.

Suggested Citation

  • Izabela Jelovac & Samuel Kembou Nzale, 2017. "Regulation and Altruism," AMSE Working Papers 1737, Aix-Marseille School of Economics, Marseille, France.
  • Handle: RePEc:aim:wpaimx:1737
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    References listed on IDEAS

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    More about this item

    Keywords

    altruism; Moral Hazard; adverse selection; regulator-agent joint production;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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