Do the Poor Benefit Less from Informal Risk-Sharing? Risk Externalities and Moral Hazard in Decentralized Insurance Arrangements

2014 ◽  
Author(s):  
Matthieu Delpierre ◽  
Bertrand Verheyden ◽  
Sttphanie Weynants
Keyword(s):  
Moral Hazard ◽  
Risk Sharing ◽  
The Poor ◽  
Informal Risk Sharing

Risk-Taking and Risk-Sharing Incentives under Moral Hazard

2014 ◽  
Vol 6 (1) ◽  
pp. 58-90 ◽  
Author(s):  
Mohamed Belhaj ◽  
Renaud Bourlès ◽  
Frédéric Deroïan
Keyword(s):  
Developing Countries ◽  
Moral Hazard ◽  
Risk Taking ◽  
Risk Sharing ◽  
Investment Risk ◽  
Two Agents ◽  
The Impact ◽  
Informal Risk Sharing ◽  
Risky Technology ◽  
Level Of Risk

This paper explores the effect of moral hazard on both risk-taking and informal risk-sharing incentives. Two agents invest in their own project, each choosing a level of risk and effort, and share risk through transfers. This can correspond to farmers in developing countries, who share risk and decide individually upon the adoption of a risky technology. The paper mainly shows that the impact of moral hazard on risk crucially depends on the observability of investment risk, whereas the impact on transfers is much more utility dependent. (JEL D81, D82, D86, G22)

scholarly journals Variation margins, fires sales, and information-constrained optimality

2020 ◽  
Author(s):  
Bruno Biais ◽  
Florian Heider ◽  
Marie Hoerova
Keyword(s):  
Moral Hazard ◽  
Risk Sharing ◽  
Asset Prices ◽  
Counterparty Risk ◽  
Fire Sales ◽  
Risk Protection ◽  
Incentive Constraints

Abstract In order to share risk, protection buyers trade derivatives with protection sellers. Protection sellers’ actions affect the riskiness of their assets, which can create counterparty risk. Because these actions are unobservable, moral hazard limits risk sharing. To mitigate this problem, privately optimal derivative contracts involve variation margins. When margins are called, protection sellers must liquidate some assets, depressing asset prices. This tightens the incentive constraints of other protection sellers and reduces their ability to provide insurance. Despite this fire-sale externality, equilibrium is information-constrained efficient. Investors, who benefit from buying assets at fire-sale prices, optimally supply insurance against the risk of fire sales.

Disclosure and Secrecy in Employee Monitoring

2010 ◽  
Vol 22 (1) ◽  
pp. 187-208
Author(s):  
Mitchell A. Farlee
Keyword(s):  
Risk Aversion ◽  
Moral Hazard ◽  
Monitoring System ◽  
Risk Premium ◽  
Risk Sharing ◽  
Limited Liability ◽  
Efficient Production ◽  
System A ◽  
Liability Risk ◽  
Employee Monitoring

ABSTRACT: Disclosure and monitoring policy are studied, where disclosure relates to information about the monitoring system. A moral hazard model is presented where employee monitoring occurs with some exogenous probability and the owner privately learns whether he will be monitoring before the employee chooses his productive action. Disclosure policy is an owner choice between revealing to the employee whether he will be monitoring before the action (Disclosure) or remaining silent (Secrecy). The results rely on the joint presence of risk aversion and limited liability. Risk aversion creates an efficiency/risk tradeoff where secrecy obtains risk-sharing benefits. Limited liability reduces these benefits, allowing preference for disclosure. Lower monitoring probabilities increase the risk premium required to obtain effort with secrecy. For small monitoring probabilities, disclosure is preferred even though less efficient production is achieved, because disclosure provides a greater risk-sharing benefit. For high monitoring probabilities, secrecy is preferred because it leads to greater efficiency despite a greater risk premium.

Negotiating medical welfare

2018 ◽  
pp. 69-104
Author(s):  
Steven King
Keyword(s):  
Nineteenth Century ◽  
Moral Hazard ◽  
Early Nineteenth Century ◽  
Poor Law ◽  
Core Business ◽  
The Core ◽  
The Poor

This chapter foregrounds the concept of pauper agency. Using the largest corpus of letters by or about the poor ever assembled, it argues that sickness was the core business of the Old Poor Law by the early nineteenth century. Rather than paupers being simply subject to the whim and treatment of the parish, the chapter argues that they had considerable agency. Despite problems of moral hazard and the idea that sickness could be faked, paupers and officials agreed that ill health and its treatment was an area of acceptable contestation.

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