Nonparametric Identification of a Contract Model With Adverse Selection and Moral Hazard

This paper studies the nonparametric identification of a contract model with adverse selection and moral hazard. Specifically, we consider the false moral hazard model developed by Laffont and Tirole (1986). We first extend this model to allow for general random demand and cost functions. We establi...

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Bibliographic Details
Published in:Econometrica 2011-09, Vol.79 (5), p.1499-1539
Main Authors: Perrigne, Isabelle, Vuong, Quang
Format: Article
Language:English
Subjects:
Adverse selection
Applications
Contracts
Cost allocation
Cost analysis
Cost estimates
Cost functions
Cost structure
Demand curves
Demand shocks
Economic models
Equilibrium models
Exact sciences and technology
Information asymmetry
Information economics
Insurance, economics, finance
Mathematical analysis
Mathematics
Moral hazard
Moral hazard models
nonparametric identification
Nonparametric models
Parametric inference
Partial differential equations
Probability and statistics
Procurement
regulation
Sciences and techniques of general use
Statistics
Studies
Citations: Items that cite this one
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Description
Summary:This paper studies the nonparametric identification of a contract model with adverse selection and moral hazard. Specifically, we consider the false moral hazard model developed by Laffont and Tirole (1986). We first extend this model to allow for general random demand and cost functions. We establish the nonparametric identification of the demand, cost, deterministic transfer, and effort disutility functions as well as the joint distribution of the random elements of the model, which are the firm's type and the demand, cost, and transfer shocks. The cost of public funds is identified with the help of an instrument. Testable restrictions of the model are characterized.
ISSN:0012-9682
1468-0262
DOI:10.3982/ECTA6954