Regulation and Altruism

27 Pages Posted: 17 Oct 2017

See all articles by Izabela Jelovac

Izabela Jelovac

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Samuel Kembou Nzale

Aix-Marseille University - Aix-Marseille School of Economics

Date Written: October 17, 2017

Abstract

We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent's effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator's input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection.

Keywords: Altruism, Moral Hazard, Adverse Selection, Regulator-Agent Joint Production

JEL Classification: D64, D86

Suggested Citation

Jelovac, Izabela and Kembou Nzale, Samuel, Regulation and Altruism (October 17, 2017). Available at SSRN: https://ssrn.com/abstract=3054513 or http://dx.doi.org/10.2139/ssrn.3054513

Izabela Jelovac (Contact Author)

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

Samuel Kembou Nzale

Aix-Marseille University - Aix-Marseille School of Economics ( email )

2 rue de la Charité
Marseille, 13236
France

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