Moral Hazard

Last Updated on 28. April 2023 by Martin Schuster

Moral hazard means that actors act irresponsible or careless due to wrong economic incentives. These actions result in a higher risk.

A standard example is an activity that is covered by insurance. A person that has health care insurance might act more hazardous (e.g., engaging in dangerous sports) than a person who doesn’t have this insurance.