IDEAS home Printed from https://ideas.repec.org/p/ngi/dpaper/12-03.html
   My bibliography  Save this paper

A Numerical Approach to the Contract Theory: the Case of Moral Hazard

Author

Listed:
  • Hideo Hashimoto

    (Osaka University)

  • Kojun Hamada

    (Niigata University)

  • Nobuhiro Hosoe

    (National Graduate Institute for Policy Studies)

Abstract

We develop a few numerical models to examine the moral hazard problems exemplified by Itoh (2003, Ch. 4), following our earlier study (Hashimoto et al. (2011)) on the adverse selection problems. To this end, we first model a risk averse or risk neutral entrepreneur who selects his action among two options (e.g., low efforts and high efforts). The results of the models, whose computer programs are explained in detail for novice modelers, numerically illustrate the essence of the contract theory analysis. Second, the similar models, applied to the case with three effort level options, are built with and without the assumptions often employed to simplify the theoretical analysis. Through these exercises the significance of such assumptions in the contract theory analysis would be understood clearly.

Suggested Citation

  • Hideo Hashimoto & Kojun Hamada & Nobuhiro Hosoe, 2012. "A Numerical Approach to the Contract Theory: the Case of Moral Hazard," GRIPS Discussion Papers 12-03, National Graduate Institute for Policy Studies.
  • Handle: RePEc:ngi:dpaper:12-03
    as

    Download full text from publisher

    File URL: https://grips.repo.nii.ac.jp/?action=repository_action_common_download&item_id=1090&item_no=1&attribute_id=20&file_no=1
    Download Restriction: no

    File URL: https://grips.repo.nii.ac.jp/?action=repository_uri&item_id=1090&file_id=20&file_no=2
    Download Restriction: no

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ngi:dpaper:12-03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/gripsjp.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.