Information extraction and norms of mutual protection

Alberto Bisin, Danilo Guaitoli

    Research output: Contribution to journalArticle

    Abstract

    We study a class of moral hazard economies in which a principal interacts with several agents. In these economies first best allocations can be implemented via full information extraction when side-trades between agents can be restricted. When instead side-trades cannot be restricted, the ability of the principal to extract information from the agents is severely hampered. In this context, side-trades take the form of informal contracts which can be directly interpreted as norms of mutual protection, which are indeed quite common among extended family members as well as inside various social, political, and religious groups.

    Original languageEnglish (US)
    Pages (from-to)154-162
    Number of pages9
    JournalJournal of Economic Behavior and Organization
    Volume84
    Issue number1
    DOIs
    StatePublished - Sep 1 2012

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    ASJC Scopus subject areas

    • Economics and Econometrics
    • Organizational Behavior and Human Resource Management

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