Economics & Finance / Economic Theory / Microeconomics

This academic paper, authored by Bengt Holmström, explores the issue of moral hazard arising from

Bengt Holmström

Nobel Prize in Economics Papers Series： 道德风险与可观测性研究 This academic paper, authored by Bengt Holmström, explores the issue of moral hazard arising from information asymmetry in principal-agent relationships. The author investigates how to effectively balance risk-sharing and incentive mechanisms through compensation contracts when agent behavior cannot be directly observed. The research indicates that even imperfect monitoring signals, as long as they provide new information about the agent's effort, have value in improving contract effectiveness. By introducing the dimension of observability, the paper demonstrates that utilizing additional information beyond benefits (such as auditing or monitoring) can improve overall welfare when designing optimal contracts. Furthermore, the paper uses examples such as insurance deductibles and maintenance worker incentives to visually illustrate the practical application of these theories in real-world contracts.