Tag: Behavioral Economics
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Moral Hazard
Moral hazard refers to situations where a party takes on riskier behavior because they’re shielded from the consequences. It often occurs in insurance, finance, and healthcare, potentially leading to market inefficiencies and higher costs. Strategies exist to mitigate it.
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Principal-Agent Problem
The Principal-Agent Problem occurs when a person (the principal) hires someone else (the agent) to act for them, but the agent may not always act in the principal’s best interest due to differing information or motives. Solutions involve creating better incentives and transparency.
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Preference Falsification
Preference falsification refers to individuals hiding their true preferences due to societal pressures. This phenomenon can distort perceived norms, influence behavior, and potentially lead to sudden societal shifts. Its impact spans policy making, democratic processes, and economic behavior.