Insurance and Information: Firms as a Commitment Device

A.L. Bovenberg and Coen N. Teulings ()
Additional contact information
A.L. Bovenberg: Tilburg University
Coen N. Teulings: University of Amsterdam

No 01-020/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We explore the role of firms in insuring non-verifiable output. As a device that allows workers to commit to thedelivery of their output, the firm arises endogenously as an alternative to the market if workers are sufficiently riskaverse and the firm can base its incentive payments on good information. Competition, however, may allow themarket and explicit contracts to crowd out implicit insurance, even though the latter yields higher welfare.Integrating the principal-agent and shirking models, we explain why different contracting modes coexist in quitehomogeneous industries.

Keywords: Insurance; implicit contracts; moral hazard; principal agent; commitment; shirking (search for similar items in EconPapers)
JEL-codes: D23 D82 (search for similar items in EconPapers)
Date: 2001-02-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://papers.tinbergen.nl/01020.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20010020

Access Statistics for this paper

More papers in Tinbergen Institute Discussion Papers from Tinbergen Institute Contact information at EDIRC.
Bibliographic data for series maintained by Tinbergen Office +31 (0)10-4088900 ().