6. Each of the following situations involves moral hazard. In each case, identify the principal and the

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6. Each of the following situations involves moral hazard. In each case, identify the principal and the agent, and explain why there is asymmetric information. How does the action described reduce the problem of moral hazard?

a. Landlords require tenants to pay security deposits.

b. Firms compensate top executives with options to buy company shares at a given price in the future.

c. Car insurance companies offer discounts to customers who install anti-theft devices in their cars.

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Business Economics

ISBN: 388402

2nd Edition

Authors: Mark P. Taylor, Andrew Ashwin, N. Gregory Mankiw

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Question Posted: Nov 04, 2024 10:00 AM

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6. Each of the following situations involves moral hazard. In each case, identify the principal and the

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Business Economics

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