Correlation neglect, incentives, and welfare

DOI10.1016/J.ECONLET.2020.109171MaRDI QIDQ777701zbMATH OpenOpenAlexFDO

Authors Andreas Klümper, Matthias Kräkel

Publication date 7 July 2020

Published in Economics Letters (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1016/j.econlet.2020.109171

zbMATH Keywords

risk aversionmoral hazardbehavioral contract theory

Mathematics Subject Classification ID

Welfare economics (91B15) Contract theory (moral hazard, adverse selection) (91B41) Principal-agent models (91B43)

Recommendations

• Correlation and relative performance evaluation
• Incentives, Compensation, and Social Welfare
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• Incentives and performance in the presence of wealth effects and endogenous risk
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Cites work

• Aggregation and Linearity in the Provision of Intertemporal Incentives
• Correlation neglect in belief formation
• Overconfidence and moral hazard

Cited in

(3)

• Attention misallocation, social welfare and policy implications
• BASE RATE NEGLECT FOR THE WEALTH OF INTERACTING PEOPLE
• Correlation Made Simple: Applications to Salience and Regret Theory

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