English, Article, Journal or magazine article edition: Moral hazard and linear contracts : Economies with idiosyncratic risks CITANNA, Alessandro

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Bookmark: http://trove.nla.gov.au/version/22820
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Moral hazard and linear contracts : Economies with idiosyncratic risks
Author
  • CITANNA, Alessandro
Physical Description
  • preprint
Notes
  • In exchange economies where moral hazard affects the distribution of individual risks, we study the viability of linear nonexclusive contracts. It is shown that the linearity in prices and payoffs is compatible with the presence of moral hazard when coupled with a simple participation fee. More specifically, we prove existence of competitive equilibrium when individuals exchange the contracts. The participation fee can be seen as a form of sharing the profits and losses of an insurance company offering such contracts. The contracts can be given the more general interpretation of financial assets in markets where the unverifiability of trades is widespread. The asset prices are such that financial markets may be "incomplete" at equilibrium.
  • Moral hazard; competitive equilibrium; financial markets; insurance
  • RePEc:ebg:heccah:0699
Language
  • English
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