L3 Notes_Part_15 - asymmetry The agent is subject to moral hazard because they can sluff off and overconsume perks to some extent without being

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Information Asymmetry: Moral Hazard The principal compensates the agent based on information about the action. However, the action is not perfectly observable and is therefore called a hidden action. This gives rise to information
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Unformatted text preview: asymmetry. The agent is subject to moral hazard because they can sluff off and overconsume perks to some extent without being observed. Who is hurt and what can be done about it?...
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This note was uploaded on 10/05/2011 for the course ACG 5637 taught by Professor Monikacaushoulli during the Fall '08 term at University of Florida.

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L3 Notes_Part_15 - asymmetry The agent is subject to moral hazard because they can sluff off and overconsume perks to some extent without being

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