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Inspection in models of adverse selection

Author

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  • Ignacio Ortuño Ortín

    (Universidad de Alicante)

Abstract

This paper analyses the optimal inspection, tax and penalty functions, in models where the principal knows the distribution of agent types, inspections are perfect and costly, and where the actions and the types of agents are not costlessly observable by the principal. Agents and the principal have different objective functions. However, the objective functions are not completely antagonistic. The action of an agent creates an externality which affects the rest of the agents. The goal of the planner is to minimize the inefficiency created by these externalities.

Suggested Citation

  • Ignacio Ortuño Ortín, 1992. "Inspection in models of adverse selection," Working Papers. Serie AD 1992-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1992-01
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1992-01.pdf
    File Function: Fisrt version / Primera version, 1992
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    Cited by:

    1. Arguedas, Carmen, 1999. "Enviromental standards and costly monitoring," UC3M Working papers. Economics 6099, Universidad Carlos III de Madrid. Departamento de Economía.

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