Principal-Agent Problems in Humanitarian Intervention: Moral Hazards, Adverse Selection, and the Commitment Dilemma

Abstract

A number of recent studies have concluded that humanitarian intervention can produce unintended consequences that reduce or completely undermine conflict management efforts. Some analysts have argued that the incentive structure produced by third parties is a form of moral hazard. This paper evaluates the utility of moral hazard theory and a second type of principal-agent problem known as adverse selection. Whereas moral hazards occur when an insured party has an opportunity to take hidden action once a contract is in effect, adverse selection is the result of asymmetric information prior to entering into a contract. Failing to distinguish between these two types of principal-agent problems may lead to policy advice that is irrelevant or potentially harmful. Along with introducing the concept of adverse selection to the debate on humanitarian intervention, this study identifies a commitment dilemma that explains why third parties operating in weakly institutionalized environments may be unable to punish groups that take advantage of intervention.

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