Moral hazard occurs when buyers and sellers take actions to communicate quality in a world of uncertainty.

Name: Moral hazard occurs when buyers and sellers take actions to communicate quality in a world of uncertainty.
Brand: Quizplus
Rating: 4.7 (46 reviews)

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party in a transaction takes on more risk because they know the other party will bear the cost of those risks. It's not about communicating quality but about changing behavior after a deal is made, knowing that the consequences will fall on the other party.

Moral Hazard Occurs When Buyers and Sellers Take Actions to Communicate