When an agent tries to exploit information advantage in a dishonest way it is called:
A) adverse selection.
B) an information asymmetry.
C) mutually beneficial trading.
D) moral hazard.

Question

Quizplus · Accepted Answer

Moral hazard occurs when an agent has an asymmetrical information advantage and uses it in a dishonest manner. This may happen, for example, when an insurance agent sells a policy they know to be unnecessary or excessive, taking advantage of their superior knowledge about the likelihood of a particular outcome.

When an Agent Tries to Exploit Information Advantage in a Dishonest