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Moral Hazard
(redirected from Moral hazards)

   Also found in: Dictionary/thesaurus, Wikipedia 0.03 sec.
Moral hazard
The risk that the existence of a contract will change the behavior of one or both parties to the contract, e.g. an insured firm will take fewer fire precautions.

Moral Hazard
The risk that a party to a transaction or activity is not acting in good faith, or that one party has perverse incentives to act in a manner detrimental to the counter party. Moral hazards may exist for almost anything. For example, a plan for a government to bail out delinquent mortgages has the moral hazard that it will encourage mortgage holders to refrain from making their home payment. Likewise, deregulation has the moral hazard that companies will use it as incentive for short-term, unsustainable profits, rather than proper economic growth.


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In this conventional view, the parties to an insurance contract cannot be trusted to minimize moral hazards on their own.
The 11 articles here use rational choice institutional analyses and principle-agent models describe their research on how states develop and deploy standard chains of delegation, focusing on the moral hazards, accountability, a theory of efficient delegation and another that explains why public administrations develop bureaucracies.
Permitting the commercial marketplace to minimize moral hazards is one way to improve business efficiency.
 
 
 
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