Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86102
Authors: 
Bovenberg, A.L.
Teulings, Coen N.
Year of Publication: 
2001
Series/Report no.: 
Tinbergen Institute Discussion Paper 01-020/3
Abstract: 
We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to thedelivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently riskaverse and the firm can base its incentive payments on good information. Competition, however, may allow themarket and explicit contracts to crowd out implicit insurance, even though the latter yields higher welfare.Integrating the principal-agent and shirking models, we explain why different contracting modes coexist in quitehomogeneous industries.
Subjects: 
Insurance
implicit contracts
moral hazard
principal agent
commitment
shirking
JEL: 
D23
D82
Document Type: 
Working Paper

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