Explain the principal-agent problem and moral hazard

Reference no: EM13206080

Insurance companies must provide insurance to drivers who may take risks that go unreported because they don't wreck or get ticketed (or if they do wreck or get ticketed, it goes unreported to the insurance company). Briefly explain the principal-agent problem and moral hazard in economic terms.

Reference no: EM13206080

Questions Cloud

Discuss why property rights are an important variable : Briefly discuss the concept of both positive and negative externalities and give specific examples of each. In your explanations of the two, cover the differences, discuss why property rights are an important variable, and discuss any other releva..

What would happen in the market for chicken if the price : Explain what would happen in the market for chicken if the price of beef suddenly increased and remained high. Use supply and demand analysis in your answer and consider the elasticity of demand and the cross-price elasticity of demand.

What mileage will allow you to stay within your budget : a car rents for $35 per day plus .18 per mile you are on a daily budget of $71. what mileage will allow you to stay within your budget?

Estimate the slope of the curve : Estimate the slope of the curve y = f(t) at t = 0 .2 . In principle, what is the relationship between this slope and the instantaneous speed?

Explain the principal-agent problem and moral hazard : Insurance companies must provide insurance to drivers who may take risks that go unreported because they don't wreck or get ticketed (or if they do wreck or get ticketed, it goes unreported to the insurance company).

Find the 99% confidence interval of the mean number : A random sample of 48 days taken at a large hospital shows that an average of 38 patients were treated in the emergency room (ER) per day. The standard deviation of the population is 4.

How many times the mass of earth is the mass of the sun : The mass of Earth is about 6 x 1021 metric tons. The mass of the sun is about 1.998 x 1027 metric tons. About how many times the mass of Earth is the mass of the sun? Express the answer in scientific notation.

What are some of the incentives to consolidate : In a separate group discussion board, present two arguments. The first should argue in favor of the proposed merger, from the perspective of the firms. The second agrues against the proposed merger from the perspective of the broader public intere..

Where the kentucky derby is held the first saturday : The Kentucky Derby is held the first Saturday in May at Churchill Downs in Louisville, KY. The racing track is one and one-quarter miles. The winners since 1990, their margin of victory, the winning time, and the payoff on a $2 bet.

User Account

All Pages