Fighting AIDS in Africa: A Principal-Agent Analysis

Abstract

The use of a lottery by the World Bank Development Research Group to incentivize safer sexual behavior as a part of an AIDS prevention strategy in Lesotho provides an example of a novel yet real-world application of a textbook principal-agent model where the agent is risk-preferring instead of the more usual risk averse. Consideration of the model leads to the conclusion that research to understand the incentives to which risk-preferring agents respond is long overdue.

Keywords: AIDS, principal-agent, loss aversion, risk-preferring agent, lottery

JEL Classification: D81, D82, I18