%0 Report
        %A Bertola, Giuseppe
%A Koeniger, Winfried
        %T Hidden Insurance in a Moral Hazard Economy
        %D 2013
        %8 2013 Dec
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 7806
        %U https://www.iza.org/publications/dp7806
        %X We consider an economy where individuals privately choose effort and trade competitively priced securities that pay off with effort-determined probability. We show that if insurance against a negative shock is sufficiently incomplete, then standard functional form restrictions ensure that individual objective functions are optimized by an effort and insurance combination that is unique and satisfies first- and second-order conditions. Modeling insurance incompleteness in terms of costly production of private insurance services, we characterize the constrained inefficiency arising in general equilibrium from competitive pricing of nonexclusive financial contracts.
        %K first-order approach
%K principal agent
%K hidden action
%K constrained efficiency