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L3 Notes_Part_15 - asymmetry The agent is subject to moral...

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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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