Home cleaning services and general contractors often advertise that they are bonded. What this means is that

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Home cleaning services and general contractors often advertise that they are bonded. What this means is that the seller of the service has put up money with a third party that is available to the buyer if, for example, the cleaners damage or steal property or if the general contractor fails to complete the project or completes it in a substandard way. Using the concepts of moral hazard and signaling, explain the purpose of bonding. As a bonus, why is bonding used for these services in particular?
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Modern Principles of Economics

ISBN: 978-1429278393

3rd edition

Authors: Tyler Cowen, Alex Tabarrok

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