KellyFact checked by Jiwon MaReviewed by Robert C. KellyFact checked by Jiwon Ma Moral hazard and adverse selection both describe situations where one party is at a disadvantage as a result of ...

Citations: Swinkels, Jeroen, Henrique Castro-Pires, Hector Chade. 2024. Online Appendix for Disentangling Moral Hazard and Adverse Selection. American Economic Review. (1)1-37.

The firm is protected by limited liability. Faced with adverse selection, then moral hazard, we show that the buyer offers a fully pooling incentive scheme to the firm. Moreover, the incentive ...