Describe the moral-hazard problem

Reference no: EM131917857

Problem

1. A club charges a flat fee for an open bar (all-you can-drink). Describe the moral-hazard problem.

2. Imagine that you own a bagel shop, which you visit once a day. According to company policy, employees are supposed to pay for all the bagels they eat. Why is moral hazard likely to be a problem in this situation, and what could you do to prevent it?

Reference no: EM131917857

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