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The Welfare Economics of Moral Hazard

Richard Arnott and Joseph Stiglitz

Working Paper from Economics Department, Queen's University

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 six types of market failure. Each of the subsequent sections focusses on a particular market failure.

Pages: 48 pages
Date: 1986
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Citations: View citations in EconPapers (9)

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