Related papers: Optimism, overconfidence, and moral hazard
We study a model of moral hazard with heterogeneous beliefs where each of agent's actions gives rise to a pair of probability distributions over output levels, one representing the beliefs of the agent and the other those of the principal.…
This paper considers dynamic moral hazard settings, in which the consequences of the agent's actions are not precisely understood. In a new continuous-time moral hazard model with drift ambiguity, the agent's unobservable action translates…
We characterize incentive compatible mechanisms in environments with hidden types and flexible hidden actions. Our approach introduces extended recommendation schedules that specify prescribed actions also off-path, after misreports. This…
In the classical principal-agent problem, a principal must design a contract to incentivize an agent to perform an action on behalf of the principal. We study the classical principal-agent problem in a setting where the agent can be of one…
We consider a contracting problem in which a principal hires an agent to manage a risky project. When the agent chooses volatility components of the output process and the principal observes the output continuously, the principal can…
We examine the trade-off between the provision of incentives to exert costly effort (ex-ante moral hazard) and the incentives needed to prevent the agent from manipulating the profit observed by the principal (ex-post moral hazard).…
I use a novel approach to compare information in several classes of moral hazard problems: implementability, cost under risk neutrality and limited liability, and cost facing an agent with a general preference for money. Incentives in moral…
Many biological, psychological and economic experiments have been designed where an organism or individual must choose between two options that have the same expected reward but differ in the variance of reward received. In this way,…
This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the…
Machine learning has become increasingly popular in informing data-driven policy-making. Policies influence behavior in individuals or populations, and ideally, through observational signals, policy-makers learn which policies are…
We study a moral hazard problem with adverse selection: a risk-neutral agent can directly control the output distribution and possess private information about the production environment. The principal designs a menu of contracts satisfying…
Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
We present a first approximation of agent behaviour in a generalized model in contract theory. This model relaxes some of the the assumptions of one of the classical models allowing to include a broader range of agents. We introduce the…
This paper investigates a Pareto optimal insurance problem, where the insured maximizes her rank-dependent utility preference and the insurer is risk neutral and employs the mean-variance premium principle. To eliminate potential moral…
This paper investigates the moral hazard problem in finite horizon with both continuous and lump-sum payments, involving a time-inconsistent sophisticated agent and a standard utility maximiser principal. Building upon the so-called dynamic…
In this paper, we extend the Holmstro\"om and Milgrom problem [47] by adding uncertainty about the volatility of the output for both the Agent and the Principal. We study more precisely the impact of the "Nature" playing against the Agent…
We consider a continuous time Principal-Agent model on a finite time horizon, where we look for the existence of an optimal contract both parties agreed on. Contrary to the main stream, where the principal is modelled as risk-neutral, we…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…
Cyber insurance is a risk-sharing mechanism that can improve cyber-physical systems (CPS) security and resilience. The risk preference of the insured plays an important role in cyber insurance markets. With the advances in information…
Risk sensitivity has become a central theme in reinforcement learning (RL), where convex risk measures and robust formulations provide principled ways to model preferences beyond expected return. Recent extensions to multi-agent RL (MARL)…