Acta Oeconomica Pragensia 2006, 14(3):18-33 | DOI: 10.18267/j.aop.81

"Principal - Agent" Problem in the Context of the Economic Survival

Jiří Hlaváček1, Michal Hlaváček2
1 Prof. RNDr. Jiří Hlaváček, CSc. - professor, Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Smetanovo nábřeží 6, 110 00 Praha 1, Czech Republic, jihlava@fsv.cuni.cz; research fellow; Department of Econometrics, Institute of Information Theory and Automation of the Academy of Sciences of the Czech republic, Pod Vodárenskou věží 4, 182 08 Praha 8
2 PhDr. Michal Hlaváček, Ph.D. - assistant, Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Smetanovo nábřeží 6, 110 00 Praha 1, Czech Republic, hlavacekm@fsv.cuni.cz; adviser to the Board, Czech National Bank, Na Příkopě 864/28, 110 00 Praha 1, michal.hlavacek@cnb.cz

This paper analyses problems within the asymmetric information models (principal agent models) where we replace standard assumption of maximisation of expected income by maximisation of probability of economic survival. This paper concentrates on two basic models - adverse selection model and moral hazard model. In both cases the effect of asymmetry of information gets weaker or even disappears. Contrary to standard approach the competitive Pareto effective equilibrium could exists in both models with pooled contract with full coverage of possible accident by the principal.

Keywords: moral hazard, adverse selection, probability of survival, Pareto distribution of probability
JEL classification: D82

Published: October 1, 2006  Show citation

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Hlaváček, J., & Hlaváček, M. (2006). "Principal - Agent" Problem in the Context of the Economic Survival. Acta Oeconomica Pragensia, 14(3), 18-33. doi: 10.18267/j.aop.81
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