Moral hazard is a situation in which asymmetric information results in high-quality goods or high-quality consumers being squeezed out of transactions because they are unable to demonstrate their quality.

Question

Quizplus · Accepted Answer

Moral hazard refers to a situation where one party takes more risks because they know they won't bear the full consequences of their actions, not to the issue of high-quality goods or consumers being squeezed out due to asymmetric information. The latter describes the concept of adverse selection.

Moral Hazard Is a Situation in Which Asymmetric Information Results