Efficient Allocations with Moral Hazard and Hidden Borrowing and Lending: A Recursive Formulation

B-Tier
Journal: Review of Economic Dynamics
Year: 2008
Volume: 11
Issue: 4
Pages: 781-803

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We propose a tractable recursive framework to study the optimal allocation of consumption and effort in a dynamic setting with moral hazard where agents have secret access to the credit market or to storage. The recursive structure is based on a generalized first order approach, whose validity must be verified ex-post. Thanks to the recursive formulation of the optimal contract, the verification procedure turns out to be numerically parsimonious as it can be performed using standard dynamic programming

Technical Details

RePEc Handle
repec:red:issued:06-26
Journal Field
Macro
Author Count
2
Added to Database
2026-01-24