This paper explores the effect of moral hazard on both risk-taking and informal risk-sharing incentives. Two agents invest in their
own project, each choosing a level of risk and effort, and share risk through transfers. This can correspond to farmers in developing
countries, who share risk and decide individually upon the adoption of a risky technology. The paper mainly shows that the impact
of moral hazard on risk crucially depends on the observability of investment risk, whereas the impact on transfers is much more utility
Belhaj, Mohamed, Renaud Bourlès, and Frédéric Deroïan.
"Risk-Taking and Risk-Sharing Incentives under Moral Hazard."
American Economic Journal: Microeconomics,
Criteria for Decision-Making under Risk and Uncertainty
Asymmetric and Private Information; Mechanism Design
Economics of Contract: Theory
Insurance; Insurance Companies; Actuarial Studies