Competitive equilibrium with moral hazard in economies with multiple commodities

Alessandro Citanna, Antonio Villanacci

Research output: Contribution to journalArticle

Abstract

We study an economy with competitive commodity markets and exclusive pairwise contractual relations with moral hazard, where both the principal and the agent can be risk averse. We show existence of equilibria and their generic constrained suboptimality, by means of a change in the compensation schemes. Such suboptimality occurs provided the number of commodities is sufficiently large relative to the number of states and pair types, and there are at least three future states of the world.

Original languageEnglish (US)
Pages (from-to)117-147
Number of pages31
JournalJournal of Mathematical Economics
Volume38
Issue number1-2
DOIs
StatePublished - Sep 2002

Keywords

  • Constrained suboptimality
  • General equilibrium
  • Moral hazard

ASJC Scopus subject areas

  • Economics and Econometrics
  • Applied Mathematics

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