Mike realizes that one of the trees on his backyard is fairly tall and could cause damage to his house in the case of an ice storm. He decides not to trim the tree since his home insurance has full coverage from such damage. This is an example c incentive alignment ex-post moral hazard adverse selection ex-ante moral hazard incentive compatibility
Mike realizes that one of the trees on his backyard is fairly tall and could cause damage to his house in the case of an ice storm. He decides not to trim the tree since his home insurance has full coverage from such damage. This is an example c incentive alignment ex-post moral hazard adverse selection ex-ante moral hazard incentive compatibility
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:Question 17
Mike realizes that one of the trees on his backyard is fairly tall and could cause
damage to his house in the case of an ice storm. He decides not to trim the tree
since his home insurance has full coverage from such damage. This is an example of
incentive alignment
ex-post moral hazard
adverse selection
ex-ante moral hazard
incentive compatibility
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