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Moral Hazard, Agency Costs, and Asset Prices in a Competitive Equilibrium

  • Ram T. S. Ramakrishnan

    (Massachusetts Institute of Technology)

  • Anjan V. Thakor

    (Washington University in St. Louis)

The behavior of economic agents in the presence of uncertainty about exogenous events and imperfect information about the endogenously influenced actions of other agents with whom they contract has been receiving growing attention. In particular, the economic theory of agency explicitly recognizes that when agents enter into synergistic relationships, each agent will act in a manner consistent with the maximization of its personal welfare, thus giving rise to a phenomenon called moral hazard.

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File URL: http://econwpa.repec.org/eps/fin/papers/0411/0411033.pdf
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Paper provided by EconWPA in its series Finance with number 0411033.

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Length: 31 pages
Date of creation: 11 Nov 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0411033
Note: Type of Document - pdf; pages: 31
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Gonedes, Nicholas J, 1976. "The Capital Market, the Market for Information, and External Accounting," Journal of Finance, American Finance Association, vol. 31(2), pages 611-30, May.
  2. Baron, David P, 1979. "On the Relationship between Complete and Incomplete Financial Market Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(1), pages 105-17, February.
  3. Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
  4. Diamond, Douglas W & Verrecchia, Robert E, 1982. " Optimal Managerial Contracts and Equilibrium Security Prices," Journal of Finance, American Finance Association, vol. 37(2), pages 275-87, May.
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