Chapter 16: Q. 12 (page 398)
What is the problem of moral hazard?
Short Answer
A moral hazard describes a situation in which people are ready to incur more risk than usual after taking precautions, safety procedures, or insurance coverage.
Chapter 16: Q. 12 (page 398)
What is the problem of moral hazard?
A moral hazard describes a situation in which people are ready to incur more risk than usual after taking precautions, safety procedures, or insurance coverage.
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Get started for freeIn an insurance system, would you expect each person to receive in benefits pretty much what they pay in premiums, or is it just that the average benefits paid will equal the average premiums paid?
Why might it be difficult for a buyer and seller to
agree on a price when imperfect information exists?
To what sorts of customers would an insurance company offer a policy with a high copay? What about a high premium with a lower copay?
What are some ways that someone looking for a loan might reassure a bank that is faced with imperfect information about whether the borrower will repay the loan?
What is an actuarially fair insurance policy?
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