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The Moral Hazard Problem

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Moral Hazard Problem?Moral hazard refers to the case when people engage in riskier behavior with insurance than they would if they did not have insurance. For example, if you have health insurance that covers the cost of visiting the doctor, you may be...

Imperfect information

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Imperfect information?Every purchase is based on a belief about the satisfaction that the good or service will provide. In turn, these beliefs are based on the information that the buyer has available. For many products, the information available to the buyer...

The Adverse Selection Problem

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is The Adverse Selection Problem?Adverse selection refers to the problem in which insurance buyers have more information about whether they are high-risk or low-risk than the insurance company does. This creates an asymmetric information problem for the insurance...

Imperfect Information -Equilibrium Price and Quantity?

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Imperfect Information Affect Equilibrium Price and Quantity?The presence of imperfect information can discourage both buyers and sellers from participating in the market. Buyers may become reluctant to participate because they cannot determine the...

Oligopoly and the Prisoner’s Dilemma

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How do Oligopolists face a Prisoner’s Dilemma? The members of an oligopoly can face a prisoner’s dilemma, also. If each of the oligopolists cooperates in holding down output, then high monopoly profits are possible. Each oligopolist, however, must worry that...
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