Insurance and Information: Firms as a Commitment Device

44 Pages Posted: 23 Aug 2002

See all articles by A. Lans Bovenberg

A. Lans Bovenberg

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Coen N. Teulings

University of Amsterdam; University of Cambridge

Date Written: July 2002

Abstract

We explore the role of firms in insuring risk-averse workers. As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the spot market if workers are sufficiently risk averse and the firm can base incentive payments on good information. Competition, however, may allow the spot market and explicit contracts to crowd out implicit insurance provided by the firm, even though the latter yields higher welfare. We explain why different governance structures coexist in quite homogeneous industries.

Keywords: Insurance, implicit contracts, moral hazard, principal agent, commitment, shirking

JEL Classification: D23, D82

Suggested Citation

Bovenberg, A. Lans and Teulings, Coen N., Insurance and Information: Firms as a Commitment Device (July 2002). Available at SSRN: https://ssrn.com/abstract=324963

A. Lans Bovenberg (Contact Author)

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2912 (Phone)
+31 13 466 3066 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Coen N. Teulings

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
18
Abstract Views
916
PlumX Metrics