Answered step by step
Verified Expert Solution
Question
1 Approved Answer
The president of a university with enrollment problems was incentivized by her board of trustees to improve the situation. If headcount enrollment increased by 5%
The president of a university with enrollment problems was incentivized by her board of trustees to improve the situation. If headcount enrollment increased by 5% or more, she would receive a $50,000 one-time bonus payment. Lo and behold, enrollment subsequently increased by 5.1% and the board paid up. Later, after the president had departed, the board learned that the president had decreased the budget of the library and transferred personnel from other administrative offices to generate the enrollment increase. Is this an example of moral hazard? Why or why not? In general, what can decision-makers do to avoid or avert such situations
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started