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Misperceptions, moral hazard and incentives in groups
Author(s) -
Gaynor Martin
Publication year - 1986
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090070411
Subject(s) - moral hazard , incentive , outcome (game theory) , pareto principle , pareto optimal , nash equilibrium , work (physics) , economics , microeconomics , balance (ability) , set (abstract data type) , mathematical economics , welfare economics , operations management , computer science , psychology , engineering , mechanical engineering , neuroscience , programming language
Recent work has shown that, in the presence of moral hazard, balanced‐budget Nash equilibria in groups are not Pareto‐optimal. This work shows that when agents misperceive the effects of their actions on the joint outcome there exist a set of sharing rules which balance the budget and lead to a Pareto‐optimal Nash equilibrium.