Moral Hazard and Bargaining Power

Demougin, Dominique ORCID: 0000-0002-1744-0390 and Helm, Carsten
(2006) Moral Hazard and Bargaining Power. German Economic Review, 7 (4). 463 - 470.

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<jats:title>Abstract</jats:title> <jats:p> We introduce bargaining power in a moral hazard framework where parties are risk-neutral and the agent is financially constrained. We show that the same contract emerges if the concept of bargaining power is analyzed in either of the following three frameworks: in a standard principal-agent (P-A) framework by varying the agent’s outside opportunity, in an alternating offer game, and in a generalized Nash-bargaining game. However, for sufficiently low levels of the agent’s bargaining power, increasing it marginally does affect the equilibrium in the Nash-bargaining game, but not in the P-A model and in the alternating offer game.</jats:p>

Item Type: Article
Depositing User: Symplectic Admin
Date Deposited: 15 Aug 2016 10:06
Last Modified: 26 Apr 2022 11:44
DOI: 10.1111/j.1468-0475.2006.00130.x