Governments must usually take policy decisions with an imperfect knowledge of the economic actors' type or the actors' effort level. These issues are addressed within the framework of classic adverse selection or moral hazard models. I discuss in this paper how would the government’s and the...

We show that contracting in agency with voluntary participation may involve incentives for the agent's abstention. Their provision alters the optimality criteria in the principal's decision-making, further distorts the mechanism, and may lead to breakdown of contracting in circumstances where...

This paper provides a complete characterization of equilibria in a game-theoretic version of Rothschild and Stiglitz's (1976) model of competitive insurance. I allow for stochastic contract offers by insurance firms and show that a unique symmetric equilibrium always exists. Exact conditions...

Various approaches used in Agent-based Computational Economics (ACE) to model endogenously determined interactions between agents are discussed. This concerns models in which agents not only (learn how to) play some (market or other) game, but also (learn to) decide with whom to do that (or not).

I study the effects of improved public information on equilibrium welfare and price dispersion, providing sufficient conditions for negative and positive effects. Public information affects welfare by reducing excessive (though rational) pessimism induced by sequential learning. Reduced...

Decoy ballots do not count in election outcomes, but otherwise they are indistinguishable from real ballots. By means of a game-theoretical model, we show that decoy ballots may not provide effective protection against a malevolent adversary trying to buy real ballots. If the citizenry is...

We study a moral hazard model in which the output is stochastically determined by both the agent's hidden effort and an uncertain state of the world. We investigate how the contractibility of the ex-post realization of the state affects the principal's incentive to provide information. While...

The concept of moral hazard originates in the insurance industry, where it generally indicates that the presence of an insurance contract increases the likelihood of a claim and the size of a claim. The concept is an important one for all economics students to learn, especially students of...

A transaction involving a buyer and a competitive seller is studied under the hypothesis that individuals may have a certain tendency to keep promises. The parties can choose a complete contract where costly arrangements are made so that it is verifiable whether the seller has delivered a...

This article analyzes how legal presumptions can mediate between costly litigation and ex ante incentives. We augment a moral hazard model with a redistributional litigation game in which a presumption parameterizes how a court 'weighs' evidence offered by the opposing sides. Strong prodefendant...