Optimism, overconfidence, and moral hazard
I revisit the standard moral-hazard model, in which an agent’s preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the model’s parameters are identified. I propose general behavioural...
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| Format: | Journal article |
| Language: | English |
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University of Chicago Press
2024
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| _version_ | 1826317576620212224 |
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| author | Sinander, L |
| author_facet | Sinander, L |
| author_sort | Sinander, L |
| collection | OXFORD |
| description | I revisit the standard moral-hazard model, in which an agent’s preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the model’s parameters are identified. I propose general behavioural definitions of relative (over)confidence and optimism, and characterise these in terms of the parameters of the moral-hazard model. My formal results are rooted in a simple but powerful insight: that the moral-hazard model is closely related to the well-known ‘variational’ model of choice under uncertainty. |
| first_indexed | 2024-09-25T04:31:16Z |
| format | Journal article |
| id | oxford-uuid:0878519d-b41a-4a98-b0c8-785fdb4479c3 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2025-03-11T16:56:06Z |
| publishDate | 2024 |
| publisher | University of Chicago Press |
| record_format | dspace |
| spelling | oxford-uuid:0878519d-b41a-4a98-b0c8-785fdb4479c32025-02-24T09:57:16ZOptimism, overconfidence, and moral hazardJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:0878519d-b41a-4a98-b0c8-785fdb4479c3EnglishSymplectic ElementsUniversity of Chicago Press2024Sinander, LI revisit the standard moral-hazard model, in which an agent’s preference over contracts is rooted in costly effort choice. I characterise the behavioural content of the model in terms of empirically testable axioms, and show that the model’s parameters are identified. I propose general behavioural definitions of relative (over)confidence and optimism, and characterise these in terms of the parameters of the moral-hazard model. My formal results are rooted in a simple but powerful insight: that the moral-hazard model is closely related to the well-known ‘variational’ model of choice under uncertainty. |
| spellingShingle | Sinander, L Optimism, overconfidence, and moral hazard |
| title | Optimism, overconfidence, and moral hazard |
| title_full | Optimism, overconfidence, and moral hazard |
| title_fullStr | Optimism, overconfidence, and moral hazard |
| title_full_unstemmed | Optimism, overconfidence, and moral hazard |
| title_short | Optimism, overconfidence, and moral hazard |
| title_sort | optimism overconfidence and moral hazard |
| work_keys_str_mv | AT sinanderl optimismoverconfidenceandmoralhazard |