In health insurance, a traditional deductible (i.e. with a deductible range [0,d]) is in theory not effective in reducing moral hazard for individuals who know (ex-ante) that their expenditures will exceed the deductible amount d, e.g. those with a chronic disease. To increase the effectiveness, this paper proposes to shift the deductible range to [s(i),s(i)+d], with starting point s(i) dependi...

This paper reexamines the efficiency-based arguments for optimal health insurance, extending the classic analysis to consider optimal coverage for prevention and treatment separately. Our paper considers the tradeoff between individuals' risk reduction on the one hand, and both ex ante and ex post moral hazard on the other. We demonstrate that it is always desirable to offer at least some insur...

We characterize optimal contracts for insurance coverage of a service whose price may vary across service providers. Households must engage in costly search to learn the price of a particular service firm, and the presence of insurance reduces incentive to search. There is a continuum of ex-ante identical consumers and firms. Search is simultaneous as in Burdett and Judd (1983). We construct a ...

The percentage of those uninsured in the U.S. has risen in recent years, although out-of-pocket expenditures have declined. At the same time, the obesity rate has significantly risen. We look at obesity in the context of a model in which the status of health insurance might play a role in influencing body weights. In this context, adverse selection is likely to be an issue, as those with ailmen...

The presence of moral hazard in the banking sector can have worrying results. This paper examines the role of government guarantees to banks in generating moral hazard in Iran. We test for moral hazard among bank creditors by determining whether protected banks received more funds from creditors than non-protected banks. Empirically, to determine the existence of moral hazard among bank manag...

How do borrowers respond to improvements a lender’s ability to punish defaulters? We implemented a randomized field experiment in Malawi examining the impact of fingerprinting of borrowers, which improves the lender’s ability to withhold future loans from individuals who have previously defaulted. Study participants were smallholder farmers applying for agricultural input loans, and were random...

This paper characterizes optimal IMF policy in an environment with moral hazard followed by adverse selection. In our framework, government actions to improve domestic productivity are not always e¤ective, and the government learns of the success of its actions before foreign investors. Without the IMF, it is not possible for foreign investors to discern the quality of the domestic production s...