Limited liability and non-responsiveness in agency models

• 成果类型: Article
• 署名作者: Castro-Pires, Henrique; Moreira, Humberto
• 署名单位: Northwestern University
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2021.03.010
• 发表日期: 2021
• 页码: 73-103
• 关键词: Limited liability; adverse selection; moral hazard; Pooling contracts; Non-responsiveness

摘要

This paper analyzes the optimal menu of contracts offered by a risk-neutral principal to a risk-averse agent under moral hazard, adverse selection, and limited liability. We show that a limited liability constraint causes pooling of the most efficient agent types. We also find sufficient conditions under which full pooling is optimal, regardless of the agent's risk aversion or type distribution. Our model suggests that offering a single contract is often optimal in environments with moral hazard, adverse selection, and in which the principal faces a limited liability constraint. (C) 2021 Elsevier Inc. All rights reserved.