Monotone Solutions to the Moral Hazard Problem
39 Pages Posted: 7 Aug 2018
Date Written: July 18, 2018
This paper investigates monotone solutions of the moral hazard problems without the monotone likelihood ratio property. The optimal monotone solutions are explicitly characterized by a concave envelope relaxation approach for a two-action model in which the principal is risk neutral or exhibits constant absolute risk aversion.
Keywords: Moral hazard, Monotone solution, Concave envelope, Monotone likelihood ratio
JEL Classification: C61, D82, D86
Suggested Citation: Suggested Citation