Optimal Contracts for Agents with Adverse Selection

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Summary

Two models are developed: pure adverse selection model and mixed adverse selection and moral hazard model, which find that whether a principal provides high-type contract or a separating equilibrium contract depends on the probability of existence of low-type agents in the market.

Type
article
Published
2020-01-07
Cited by
0
References
24
Access
Open access

Keywords

Adverse selection, Information asymmetry, Moral hazard, Contract theory, Incentive compatibility

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