Identify each of the following as an adverse selection or a moral
hazard problem:
Instructions: In each case, very briefly
(one sentence or two) state the reason for your
choice.
a) A person with car insurance fails to lock his car doors when he
shops at a mall.
b) A person with family history of cancer purchases the most
complete health coverage available.
c) A person with health insurance takes more risks on the ski
slopes of Aspen than he...
Determine if the asymmetric information problem is adverse
selection or moral hazard. Then briefly explain the structure of
the asymmetric problem for each.
Football Season Insurance offers to reduce the premium on its
auto insurance policies to drivers who install/activate a
monitoring device on their cars.
Determine if the asymmetric information problem is adverse
selection or moral hazard. Then briefly explain the structure of
the asymmetric problem for each.
You are very busy and hired a service to maintain your lawn.
Because of travel, you are unlikely to be home the day they service
it.
In each of the following cases, identify whether the problem is
adverse selection or moral hazard and explain your answer. How
might the problem be dealt with?
Rick has gotten a large advance to write a textbook. With the
money in hand, he prefers spending his time sailing rather than
sitting in his office working on the book.
Justin is trying to get a large advance to write a textbook. He
knows, but publishers don’t, that he did poorly on...
In each of the following cases, identify whether the problem is
adverse selection or moral hazard, and explain your answer. How
might the problem be dealt with?
Rick has gotten a large advance to write a textbook. With the
money in hand, he prefers spending his time sailing rather than
sitting in his office working on the book.
David is trying to get a large advance to write a textbook. He
knows, but publishers don’t, that he did poorly on...