Moral Hazard and Ambiguity

Philipp Weinschenk ()
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Philipp Weinschenk: Max Planck Institute for Research on Collective Goods

No 2010_39, Discussion Paper Series of the Max Planck Institute for Research on Collective Goods from Max Planck Institute for Research on Collective Goods

Abstract: 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 contrast to the ones of the orthodox theory, but are empirically of high relevance.

Keywords: financial crisis; Basel Accord; banking regulation; capital requirements; modelbased approach; systemic risk (search for similar items in EconPapers)
JEL-codes: D82 M12 M52 (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-ban, nep-bec, nep-cta and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:mpg:wpaper:2010_39

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