The trade-off between incentives and endogenous risk

dc.contributor.authorAraújo, Aloísio Pessoa de
dc.contributor.authorMoreira, Humberto
dc.contributor.authorTsuchida, Marcos
dc.date.accessioned2019-02-28T15:46:58Z
dc.date.available2019-02-28T15:46:58Z
dc.date.issued2007-11-01
dc.description.abstractNegative relationship between risk and incentives, predicted by standard moral hazard models, has not been confirmed by empirical work. We propose a moral hazard model in which heterogeneous risk-averse agents can control the mean and variance of the profits. The possibility of risk reduction allows the agent’s marginal utility of incentives to be increasing or decreasing in risk aversion. Positive relationship between endogenous risk and incentives is found when marginal utility of incentives and variance are decreasing in risk aversion. Exogenous risk and incentives are negatively related. Those results remain when adverse selection precedes moral hazard.eng
dc.identifier.doi10.12660/bre.v27n22007.1524
dc.identifier.file1524
dc.identifier.issn1980-2447
dc.identifier.urihttps://hdl.handle.net/10438/27131
dc.language.isoeng
dc.publisherSociedade Brasileira de Econometria
dc.relation.ispartofseriesBrazilian Review of Econometrics
dc.rights.accessRightsopenAccesseng
dc.sourcePeriódicos científicos e revistas FGV
dc.subjectIncentiveseng
dc.subjectNon-monotone contractseng
dc.subjectSingle-crossing propertyeng
dc.subject.areaEconomiapor
dc.subject.bibliodataRisco (Economia)por
dc.subject.bibliodataInvestimentos - Administraçãopor
dc.titleThe trade-off between incentives and endogenous riskeng
dc.typeArticle (Journal/Review)eng
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