Moral hazard is said to exist when one party to a transaction

Question

Quizplus · Accepted Answer

Moral hazard exists when one party in a transaction has the incentive and ability to shift costs to another party. For example, if someone has insurance for their car, they may take more risks while driving because they know they are protected by insurance. This is a form of moral hazard because the insured party is shifting the cost of any potential accidents to the insurance company.

Moral Hazard Is Said to Exist When One Party to a Transaction