Template-type: ReDIF-Paper 1.0
Author-Name: Hector Chade
Author-Email: Hector.Chade@asu.edu
Author-Homepage: http://wpcarey.asu.edu/Directory/stafffaculty.cfm?cobid=1039499
Author-Workplace-Name: W. P. Carey School of Business Department of Economics
Author-Workplace-Homepage: http://wpcarey.asu.edu/ecn/
Author-Name: Virginia Vera de Serio
Author-Email: 
Author-Homepage: http://wpcarey.asu.edu/Directory/stafffaculty.cfm?cobid=2133558
Author-Workplace-Name: Facultad de Ciencias Economicas, Universidad Nacional
Author-Workplace-Homepage: 

Title: Risk Aversion, Moral Hazard, and the Principal's Loss
Abstract: In their seminal paper on the principal-agent model with moral hazard, Grossman and Hart (1983) show that the loss to the principal from being unable to observe the agent’s action is increasing in the agent’s degree of absolute risk aversion. Their proof is restricted to the case where the number of observable outcomes is equal to two, and uses an argument which is specific to that case. In this note, we provide a different proof that generalizes their result to any (finite) number of outcomes.		
Classification-JEL: D82
Keywords: 
File-URL:http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/riskav.pdf
File-Format: pdf
File-Restriction:
File-Function:
File-Size:
Handle: RePec:asu:wpaper:2133303