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Competitive Equilibrium with Moral Hazard in Economies with Multiple Commodities

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  • CITANNA, Alessandro

Abstract

We 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.

Suggested Citation

  • CITANNA, Alessandro, 2000. "Competitive Equilibrium with Moral Hazard in Economies with Multiple Commodities," HEC Research Papers Series 700, HEC Paris.
    • Handle: RePEc:ebg:heccah:0700
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    References listed on IDEAS

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    6. John Geanakoplos & Heracles M. Polemarchakis, 1985. "Existence, Regularity, and Constrained Suboptimality of Competitive Allocations When the Asset Market Is Incomplete," Cowles Foundation Discussion Papers 764, Cowles Foundation for Research in Economics, Yale University.
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    Cited by:

    1. Daron Acemoglu & Alp Simsek, 2010. "Moral Hazard and Efficiency in General Equilibrium with Anonymous Trading," Levine's Working Paper Archive 661465000000000232, David K. Levine.

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    More about this item

    Keywords

    General equilibrium; moral hazard; constrained suboptimality;
    All these keywords.

    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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