Respuesta :
The tendency of those who are insured to take more risks is a problem of moral hazard.
What exactly are adverse selection and moral hazard?
- When there is a lack of symmetric information prior to a transaction between a buyer and a seller, adverse selection takes place.
- The possibility that one party did not enter into the agreement in good faith or gave incorrect information about its assets, liabilities, or credit standing is known as a moral hazard.
- Moral hazard, in broad words, is a circumstance that arises when one party to an economic connection performs dangerous or expensive acts without informing or controlling the other party to the relationship.
- Moral hazard is the idea that people having insurance may take more risks or use less caution than they would if they didn't have it since they are aware that they are insured.
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