Most computer professionals know that difficult ethical issues may arise in their work. We believe that these professionals want to “do the right thing.” They accept their responsibilities as moral agents and they recognize that their special technical skills give them power and responsibilities. However, the will to act ethically is not sufficient; computer professionals also need skills to ar...

We consider a principal-agent model with moral hazard where the agent’s knowledge about the performance measure is ambiguous and he is averse towards ambiguity. We show that the principal may optimally provide no incentives or contract only on a subset of all informative performance measures. That is, the Informativeness Principle does not hold in our model. These results stand in stark contras...

In this paper, I study the e¤ects of overcon…dence on incentive contracts in a moral-hazard framework in which principal and agent knowingly hold asymmetric beliefs regarding the probability of success of their enterprise. Agent overcon…dence can have con‡icting e¤ects on the equilibrium contract. On the one hand, an overcon…dent agent disproportionately values successcontingent payments, and t...

The recent global financial crisis may have lessons for ecologists. One driver of the problems many countries faced toward the end of the previous decade was risky speculation by larger banks (Okamoto, 2009). In cases where such investments succeed, the bank is the winner. When such investments fail they have the potential to ruin the bank. However, the largest banks are often deemed to be so i...

Among naturalist philosophers, both defenders and opponents of moral relativism argue that prescriptive moral theories (or normative theories) should be constrained by empirical findings about human psychology. Empiricists have asked if people are or can be moral relativists, and what effect being a moral relativist can have on an individual’s moral functioning. This research is underutilized i...

We analyze the formation of partnerships as a sequential game with moral hazard within coalitions; once formed, partnerships compete a la Cournot in the marketplace. When moral hazard within coalitions is very severe, no partnership will form. However, we show that when moral hazard is not too severe the coalition structure will be either similar to or more concentrated than it is without moral...

This paper investigates the equilibrium consequences of a contractual market with moral hazard where multiple principals compete each other to offer incentive contracts to agents who choose unobservable ex post actions. We show the following limit theorems: First, when the trade–off between incentive and risk sharing causes the moral hazard problem on the side of agents, the full insurance cont...

The Role of Sickness in the Evaluation of Job Search Assistance and Sanctions* Unemployment insurance agencies may combat moral hazard by punishing refusals to apply to assigned vacancies. However, the possibility to report sick creates an additional moral hazard, since during sickness spells, minimum requirements on search behavior do not apply. This reduces the ex ante threat of sanctions. We...

We present a tractable, static, general equilibrium model with multiple sectors in which firms offer workers incentive contracts and simultaneously raise capital in stock markets. Workers optimally invest in the stock market and at the same time hedge labor income risk. Firms rationally take agents’ portfolio decisions into account. In equilibrium, the cost of capital of each sector is endogeno...