In a fundamental contribution, Prescott and Townsend (1984) [PT] have shown that the existence and efficiency properties of Walrasian equilibria extend to economies with moral hazard, when agents' trades are observable (exclusive contracts can be implemented). More recently, Bennardo and...

In a fundamental contribution, Prescott and Townsend (1984) [PT] have shown that the existence and efficiency properties of Walrasian equilibria extend to economies with moral hazard, when agents' trades are observable (exclusive contracts can be implemented). More recently, Bennardo and...

Risk-sharing in insurance is analyzed, with a view towards explaining the prevalence of deductibles. First we introduce, in a modern setting, the main concepts of the theory of risk-sharing in a group of agents. This theory we apply to the risk-sharing problem between an insurer and an insurance...

The paper studies insurance with moral hazard in a system of contingent-claims markets. Insurance buyers are modelled as Cournot monopolists or oligopolists. The other agents condition their expectations on market prices, as in models of rational-expectations equilibrium with asymmetric...

We study the welfare properties of a general equilibrium banking model with moral hazard that encompasses incentive mechanisms for bank risk-taking studied in a large partial equilibrium literature. We show that competitive equilibriums maximize welfare and yield an optimal level of banks' risk...

We study the welfare properties of a general equilibrium banking model with moral hazard that encompasses incentive mechanisms for bank risk-taking studied in a large partial equilibrium literature. We show that competitive equilibriums maximize welfare and yield an optimal level of banks' risk...

This paper investigates a dynamic agency problem that includes the AI-style agent and principal. We develop a quantitative bionic approach to dynamic contracting based on calibrating the incentive properties of a workhorse contracts model in which self-awareness and memory are endowed. We...

Under certain conditions the optimal insurance policy will offer full coverage above a deductible, as Arrow and others have shown long time ago. Interestingly, the same design of insurance policies applies in case of a single loss and ex-ante moral hazard. However, many insurance policies...

The objective of this research is to examine the inter-bank network of clients as a channel for credit risk transmission by groups of banks in Serbia characterized by different levels of credit risk (clusters). Two of the four observed groups of banks have experienced increase in NPLs through...

The relationship between a venture capitalist and an entrepreneur is modeled to investigate the impact of public subsidies on venture capital investments in start-up enterprises. In this model, the venture capitalist only finances start-up enterprises if he has sufficient expertise to make...