What's The Deal Dirk?
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Hey Dirk, can you define and provide an example of moral hazard?
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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.
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