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Hidden Insurance in a Moral Hazard Economy

Bertola, Giuseppe; Koeniger, Winfried - C.E.P.R. Discussion Papers - 2014

with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then … standard functional form restrictions 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 …

Persistent link: https://www.econbiz.de/10011084065

Insurance and Information: Firms as a Commitment Device

Bovenberg, A Lans; Teulings, Coen N - C.E.P.R. Discussion Papers - 2002

explicit contracts to crowd out implicit insurance provided by the firm, even though the latter yields higher welfare. We …

Persistent link: https://www.econbiz.de/10005667043

Optimal Incentives under Moral Hazard and Heterogeneous Agents: Evidence from Production Contracts Data

Dubois, Pierre; Vukina, Tomislav - C.E.P.R. Discussion Papers - 2006

The objective of this paper is to develop an analytical framework for estimation of the parameters of a structural model of an incentive contract under moral hazard, taking into account agents heterogeneity in preferences. We show that allowing the principal to strategically distribute the...

Persistent link: https://www.econbiz.de/10005656265

Earnings Uncertainty and Precautionary Saving

Guiso, Luigi; Jappelli, Tullio; Terlizzese, Daniele - C.E.P.R. Discussion Papers - 1992

consistent with the theory of precautionary saving and with decreasing prudence. Earnings uncertainty, however, explains only a …

Persistent link: https://www.econbiz.de/10005123641

Asset Pricing under Rational Learning about Rare Disasters

Koulovatianos, Christos; Wieland, Volker - C.E.P.R. Discussion Papers - 2011

This paper proposes a new approach for modeling investor fear after rare disasters. The key element is to take into account that investors' information about fundamentals driving rare downward jumps in the dividend process is not perfect. Bayesian learning implies that beliefs about the...

Persistent link: https://www.econbiz.de/10009201120

Auctions with Anticipated Emotions: Overbidding, Underbidding, and Optimal Reserve Prices

Roider, Andreas; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2007

The experimental literature has documented that there is overbidding in second-price auctions, regardless of bidders' valuations. In contrast, in first-price auctions there tends to be overbidding for large valuations, but underbidding for small valuations. We show that the experimental evidence...

Persistent link: https://www.econbiz.de/10005498113

Banker Compensation and Confirmation Bias

Sabourian, Hamid; Sibert, Anne - C.E.P.R. Discussion Papers - 2009

Confirmation bias refers to cognitive errors that bias one towards one's own prior beliefs. A vast empirical literature documents its existence and psychologists identify it as one of the most problematic aspects of human reasoning. In this paper, we present three related scenarios where...

Persistent link: https://www.econbiz.de/10005661569

One Person, Many Votes: Divided Majority and Information Aggregation

Bouton, Laurent; Castanheira, Micael - C.E.P.R. Discussion Papers - 2008

This paper compares the properties of three electoral systems when voters have imperfect information. Imperfect information blurs voter decisions and may divorce the electoral outcome from the true preferences of the electorate. The challenge for electoral design is therefore to translate the...

Persistent link: https://www.econbiz.de/10005662251

Cognitive Ability and Paternalism

Saint-Paul, Gilles - C.E.P.R. Discussion Papers - 2002

This Paper analyses the welfare effects of price restrictions on private contracting in a world where agents have a limited cognitive ability. People compute the costs and benefits of entering a transaction with an error. The government knows the distribution of true costs and benefits as well...

Persistent link: https://www.econbiz.de/10005662402

Reserve Prices in Auctions as Reference Points

Rosenkranz, Stephanie; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2004

We consider second-price and first-price auctions in the symmetric independent private values framework. We modify the standard model by the assumption that the bidders have reference-based utility, where the reserve price (minimum bid) plays the role of the reference point. In contrast to the...

Persistent link: https://www.econbiz.de/10005792017