The presence of moral hazard in budget breaking

Martin Gaynor

Public Choice, 1989, vol. 61, issue 3, 267 pages

Abstract: It is possible that a budget breaking incentive scheme may not solve the problem of moral hazard in team production, due to an incentive for a principal to cheat on such an agreement. This is a problem common to incentive schemes which result in an unbalanced budget, which include among them processes designed to reveal demand for public goods. This paper shows the conditions under which cheating is possible, and designs a payment scheme for the principal which is free of any cheating incentive. Copyright Kluwer Academic Publishers 1989

Date: 1989
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DOI: 10.1007/BF00123888

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