The Welfare Economics of Moral Hazard

Richard Arnott and Joseph Stiglitz

No 3316, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper shows that, except in certain limiting cases, competitive equilibrium with moral hazard is constrained inefficient. The first section compares the competitive equilibrium and the constrained social optimum in a fairly general model, and identifies types of market failure. Each of the subsequent sections focuses on a particular market failure.

Date: 1990-04
Note: PE
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Published as Risk, Information and Insurance, edited by Henri Louberge, pp. 91-121. Norwell, MA: Kluwer Academic Publishers 1990.

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Related works:
Working Paper: The Welfare Economics of Moral Hazard (1986)
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