Lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.
- He is creating moral hazard by making investors think that investment risks are minimized simply by skimming an independent stock research report.
- The recent history of the credit system can be thought of as the evolution of increasingly successful methods of reducing the risk premium caused by hidden information and moral hazard.
- For example, if moral hazard is associated with deposit insurance, the greater risks banks take may demand stronger preventive techniques.
Definition of moral hazard in:
What do you find interesting about this word or phrase?
Comments that don't adhere to our Community Guidelines may be moderated or removed.