We provide a characterization of an optimal insurance contract (coverage schedule and audit policy) when the monitoring procedure is random. When the policyholder exhibits constant absolute risk aversion, the optimal contract involves a positive indemnity payment with a deductible when the...

We consider decision-makers facing a risky wealth prospect. The probability distribution depends on pecuniary effort, e.g., the amount invested in a venture or prevention expenditures to protect against accidental losses. We provide necessary local conditions and sufficient global conditions for...

We provide sufficient conditions for the first-order approach in the principal-agent problem when the agent’s utility has the nonseparable form u(y−c(a)) where y is the contractual payoff and c(a) is the money cost of effort. We first consider a decision-maker facing prospects which cost...

We incorporate the concept of evidentiary standard to the analysis of the negligence rule under liability insurance and court errors. When the postaccident evidence is privately contractible and not too noisy, efficiency is achieved by both strict liability and a negligence rule with appropriate...

The aim of this paper is to analyze the impact of mutual firms on competition in the insurance market. We distinguish two actors in this market: mutual firms, which belong to their pooled members, and traditional companies, which belong to their shareholders. Our approach differs from the...

This paper generalizes the work of Rothschild and Stiglitz [1976], and is dealing with a game where two principals compete for an agent, when the agent has private information. The studied game has an efficient equilibrium, when the payoff of the principal does not depend on private information....

This paper considers a competitive insurance market under moral hazard and adverse selection, in which preventive efforts and self-protection costs are unobservable by insurance companies. Under reasonable assumptions, the conclusions of Rothschild and Stiglitz (1976) are preserved in our...

This paper considers the information systems induced by auditing policies in a principal- agent model with moral hazard. We point out that two such information systems A and B are seldom comparable using the customary mean-preserving spread relation between their respective likelihood ratio...