Optimal dynamic risk sharing when enforcement is a decision variable

Koeppl, Thorsten V.

doi:10.1016/j.jet.2006.03.002

Cited by 21 publications

(10 citation statements)

References 16 publications

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“…He and Zhang (2008) considered some scenarios where the retailer shares the random yield risk with the supplier and compare the supply chain members' performances under different scenarios. Koeppl (2007) developed a dynamic risk-sharing model of two risk-averse agents to study the optimal decision of using self-governance for risk sharing. Koeppl (2007) pointed out that players have incentives to share income risk.…”

Section: Risk Managementmentioning

confidence: 99%

“…Koeppl (2007) developed a dynamic risk-sharing model of two risk-averse agents to study the optimal decision of using self-governance for risk sharing. Koeppl (2007) pointed out that players have incentives to share income risk. We assume that the retailer has two types: high risk sensitivity and low risk sensitivity.…”

Section: Risk Managementmentioning

confidence: 99%

“…Under some kinds of risk-sharing rules, the supply chain's members often are better off sharing risk (Lee and Chu, 2005;Koeppl, 2007). When one of the members suffers the loss under a risk-sharing rule (i.e., the fraction t), transferring an extra subsidy from the others to the member can induce the member to accept this rule.…”

Section: The Basic Modelmentioning

confidence: 99%

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Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor

Xiao

Yang

2009

European Journal of Operational Research

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Section: Risk Managementmentioning

confidence: 99%

Section: Risk Managementmentioning

confidence: 99%

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Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor

Xiao

Yang

2009

European Journal of Operational Research

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“…7 In an interesting paper, Koeppl (2007) endogenizes the level of enforcement in dynamic risk-sharing problems.…”

Section: Avenuementioning

confidence: 99%

Consumer default with complete markets: default-based pricing and finite punishment

Mateos‐Planas

Seccia

2013

Econ Theory

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This paper studies economies with complete markets where there is positive default on consumer debt. In a simple tractable two-period model, households can default partially, at a finite punishment cost, and competitive intermediaries price loans of different sizes separately. This environment yields only partial insurance. The default-based pricing of debt makes it too costly for the borrower to achieve full insurance and there is too little trade in securities. This framework is in contrast with existing literature. Unlike the literature with default, there are no restrictions on the set of state contingent securities that are issued. Unlike the literature on lack of commitment, limited trade arises without need of debt constraints that rule default out. Compared with the latter, the present approach appears to imply more consumption inequality. An extended model with an infinite horizon, idiosyncratic risk and more realistic assumptions is used to demonstrate the general validity of this approach and its main implications.

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“…The Enforcement Model is a version of the limited commitment and endogenous enforcement model studied in Koeppl (2007) and the results from this model are used to contrast and provide insight into the role of enforcement in the General Model. With the addition of endogenous enforcement to a limited commitment environment, enforcement is decreasing in the agent's promised utility.…”

Section: Introductionmentioning

confidence: 99%

Efficient Auditing and Enforcement in Dynamic Contracts

Pogach

2011

SSRN Journal

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Private information and limited enforcement are two frictions that impede the provision of first best insurance against income risk. To mitigate these frictions, societies make costly investments into technologies such as auditing and enforcement systems. The implicit assumption throughout most of the literature is that either or both of these technologies is either costless or infinitely costly. I consider a model of efficient insurance in which at each point in time the principal can choose a level of enforceability that inhibits an agent's ability to renege on the contract and a level of auditing that inhibits his ability to conceal income. The dynamics of the optimal contract imply an endogenous lower bound on the lifetime utility of an agent, strictly positive auditing at all points in the contract and positive enforcement only when the agent's utility is sufficiently low. Furthermore, the two technologies operate as complements and substitutes at alternative points in the state space, uncovering dynamics that differ dramatically from the case in which the technologies are studied separately. JEL Classification Numbers: C73, D60, D80, E21, H76, K49

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Optimal dynamic risk sharing when enforcement is a decision variable

Cited by 21 publications

References 16 publications

Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor

Risk sharing and information revelation mechanism of a one-manufacturer and one-retailer supply chain facing an integrated competitor

Consumer default with complete markets: default-based pricing and finite punishment

Efficient Auditing and Enforcement in Dynamic Contracts

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