The Optimal Contract under Adverse Selection in a Moral-Hazard Model with a Risk-Averse Agent

The Optimal Contract under Adverse Selection in a Moral-Hazard Model with a Risk-Averse Agent

This paper studies the optimal contract offered by a risk-neutral principal to a risk-averse agent when the agent’s hidden ability and action both improve the probability of the project being successful. We show that if the agent is sufficiently prudent and able, the principal induces a higher proba...

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Bibliographic Details
Main Authors: François Maréchal, Lionel Thomas
Format: Article
Language:English
Published: MDPI AG 2018-03-01
Series:Games
Subjects:
adverse selection
moral hazard
risk aversion
prudence
Online Access:http://www.mdpi.com/2073-4336/9/1/12

Internet

http://www.mdpi.com/2073-4336/9/1/12

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