Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/88189
Authors: 
Bertola, Giuseppe
Koeniger, Winfried
Year of Publication: 
2013
Series/Report no.: 
CFS Working Paper 2013/25
Abstract: 
We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional formrestrictions ensure that individual objective functions are optimized by an effort and insurance combination that is unique and satisfies first- and second-order conditions. Modeling insurance incompleteness in terms of costly production of private insurance services, we characterize the constrained inefficiency arising in general equilibrium from competitive pricing of nonexclusive financial contracts.
Subjects: 
Hidden action
Principal agent
First-order approach
Constrained efficiency
JEL: 
E21
D81
D82
Document Type: 
Working Paper

Files in This Item:
File
Size
458.03 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.