Antonio Mele
PhD Candidate in Economics
RESEARCH
JOB MARKET PAPER
Repeated Moral Hazard and Recursive Lagrangeans
November 8th, 2008 (click for pdf version)
Abstract: Dynamic agency models with endogenous state variables or many agents are numerically intractable, or at least very difficult to solve. This problem prevented researchers from analizying an important class of economic problems, e.g. extensions of the basic unemployment insurance framework, models of international risk sharing in production economies with private information, and optimal executive compensation schemes. In this paper, I show how to solve these models, by building a general theoretical framework for the analysis of repeated moral hazard problems. The main contribution is the extension of the recursive Lagrangean techniques à la Marcet and Marimon (2008) to models with repeated moral hazard. My method can easily deal with large state spaces and many agents, allowing the analysis of currently intractable problems.
WORK IN PROGRESS
Dynamic Risk Sharing and Moral Hazard
Risk Sharing, Moral Hazard and Survival
References:
Albert Marcet
Juan Pablo Nicolini
Andrea Caggese
Placement Director:
Jaume Ventura