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Pooling promises with moral hazard

Author

Listed:
  • Catarina Goulão

    (Toulouse School of Economics (GREMAQ, INRA))

  • Luca Panaccione

    (DEDI and CEIS, Università degli Studi di Roma "Tor Vergata")

Abstract

We extend the framework of Dubey and Geanakoplos (2002) to the case of moral hazard. We analyze the equilibrium properties of the model and we show that equal ex-ante consumers may choose to promise differently, and, as a consequence, choose different actions. This illustrates how the pool of voluntary promises can induce redistribution from consumers with high expected endowment to those with low expected endowment.

Suggested Citation

  • Catarina Goulão & Luca Panaccione, 2015. "Pooling promises with moral hazard," Economics Bulletin, AccessEcon, vol. 35(1), pages 460-465.
    • Handle: RePEc:ebl:ecbull:eb-14-00093
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    References listed on IDEAS

    as
    1. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, vol. 81(2), pages 337-356, December.
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    5. Guinnane, Timothy W. & Streb, Jochen, 2011. "Moral Hazard in a Mutual Health Insurance System: German Knappschaften, 1867–1914," The Journal of Economic History, Cambridge University Press, vol. 71(1), pages 70-104, March.
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    8. Murgai, Rinku & Winters, Paul & Sadoulet, Elisabeth & Janvry, Alain de, 2002. "Localized and incomplete mutual insurance," Journal of Development Economics, Elsevier, vol. 67(2), pages 245-274, April.
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    More about this item

    Keywords

    moral hazard; pool of promises;

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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