Moral Hazard, Agency Costs, and Asset Prices in a Competitive Equilibrium
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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- Arrow, Kenneth J, 1974. "Limited Knowledge and Economic Analysis," American Economic Review, American Economic Association, vol. 64(1), pages 1-10, March.
- 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.
- 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.
- 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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