Aligning the incentives of buyers and sellers will reduce moral hazard.

Question

Quizplus · Accepted Answer

When the incentives of buyers and sellers are aligned, they are more likely to act in a way that promotes mutual benefit, reducing the likelihood of moral hazard. For example, in a transaction where the seller is responsible for repairing any defects in the product, the seller has an incentive to sell products that are of good quality, while the buyer has an incentive to thoroughly inspect the product before purchase. This alignment of incentives reduces the likelihood of the seller taking advantage of the buyer by hiding defects in the product, and the buyer taking advantage of the seller by making unreasonable demands for repairs.

Aligning the Incentives of Buyers and Sellers Will Reduce Moral