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  Nonlinear Incentive Provision in Walrasian Markets: A Cournot Convergence Approach

Hellwig, M. (2004). Nonlinear Incentive Provision in Walrasian Markets: A Cournot Convergence Approach.

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 Creators:
Hellwig, Martin1, Author              
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: D50, D62, D80 Insurance, Moral Hazard, Incentive Contracting, Walrasian Markets, Rational-Expectations, Cournot Equilibrium
 Abstract: 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 information. Thereby they correctly anticipate accident probabilities corresponding to effort incentives induced by insurance buyers' net trades. When there are many agents to share the insurance buyer's risk, Cournot equilibrium outcomes are close to being second-best. In contrast, if insurance buyers are price takers, equilibria fail to exist or are bounded away from being second-best.

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 Dates: 2004
 Publication Status: Published in print
 Pages: 51
 Publishing info: Bonn : Max Planck Institute for Research on Collective Goods
 Table of Contents: -
 Rev. Type: -
 Identifiers: Other: 2004/08
 Degree: -

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