What's The Deal Dirk?

Student Q&A's with Dirk

Hey Dirk, can you define and provide an example of moral hazard?

This question asked by Anonymous

Moral hazard exists when people have an incentive to change to take on risky behavior because they do not bear the full cost of the consequences. An extreme example would be a driver who intentionally totals their car because their insurance guarantees them a brand new vehicle. To avoid this behavior insurance companies typically have deductibles to discourage reckless driving.

Ask Your Question
Back to All Questions
Your Thoughts
Was this helpful to you?
(0 votes)
Related Content

What People are saying...

Who's Dirk?
More on the man, himself. Meet Dirk
Econ Media Library
Check out multimedia tools, videos and more in our Media Library