Independent Safety Controls with Moral Hazard
Bibliographic Data
| ID | 24040921 |
|---|---|
| Authors | Eberhard Feess (0000-0002-8365-8048), Martin Nell |
| Year | 2002 |
| Volume | 158 |
| Issue | 3 |
| Pages | 408-419 |
| Publication date | 2002-01-01 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Institutional and Theoretical Economics JITE (JOURNAL) |
| Journal identifiers | ISSN: 0932-4569 • E-ISSN: 1614-0559 |
| Publisher | Mohr Siebeck (PUBLISHER) |
| DOI | 10.1628/0932456022975303 |
| OpenAlex | W2029989113 |
| Language | EN |
| References cited | 1 |
We analyze the role of liability, insurance, and side payments for independent safety controls with unobservable care levels. By independent safety controls we mean that the accident probability depends on the care levels of two parties, and that the effects of the controls on the accident probability are stochastically independent. We show that efficiency can be reached for these kinds of double moral hazard through side payments if one agent detects that the other agent's security control has failed. This requires either an appropriate liability rule, or an arbitrarily chosen liability rule combined with fair insurance coverage.
Actuarial science · Business · Economics · Incentive · Liability insurance · Microeconomics · Moral hazard · Morale hazard · Risk analysis (engineering) · Insurance and Financial Risk Management · Law, Economics, and Judicial Systems · Legal principles and applications
| Highly cited | No |
|---|