Overview

moral hazard


Show Summary Details

Quick Reference

The observation that a contract which promises people payment on the occurrence of certain events will cause a change in behaviour to make these events more likely. For example, moral hazard suggests that if possessions are fully insured, their owners are likely to take less good care of them than if they were uninsured. The consequence is that insurance companies cannot offer full insurance. Moral hazard results from asymmetric information and is a cause of market failure. See also principal–agent problem.

Subjects: Economics.


Reference entries

See all related reference entries in Oxford Index »


Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.