Misperceptions, Moral Hazard, and Incentives in Groups

Martin Gaynor

No 35, NBER Technical Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent work has shown that, in the presence of moral hazard, balanced budget Nash equilibria in groups are not pareto-optimal. This work shows that when agents misperceive the effects of their actions on the joint outcome, there exist a set of sharing rules which balance the budget and lead to a pareto-optimal Nash equilibria.

Date: 1987-05
Note: EH
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Published as Gaynor, Martin. "Misperceptions, Moral Hazard and Incentives in Groups." Managerial and Decision Economics, Vol. 7, No. 4, (1986), pp. 279-282.

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