Insurance contracts are frequently modelled as principal–agent relationships. The purpose of this paper is to examine the interaction between differential bargaining power and the efficiency of insurance contracts. The analysis is undertaken in a framework of state-contingent production, which...

In many cases, heterogeneous prices occur in price-taking environments. In empirical work, an aggregate price index is often created from such prices and used to explain aggregate supply and derived demands. The authors show that consistent aggregation places strong restrictions on functional...