Which of the following represent problems with privatization?

Question

Quizplus · Accepted Answer

Adverse selection, moral hazard, and principal-agent conflict are all potential problems that can arise with privatization. Adverse selection occurs when the private company doesn't have enough information to accurately assess the risk of an investment. Moral hazard arises when the private company is incentivized to take on riskier investments because it can expect government bailouts if things go wrong. Principal-agent conflict occurs when the private company acts in its own interest instead of the government's interest. All of these problems can lead to negative outcomes for the public and the government.

Which of the Following Represent Problems with Privatization