Economics · Microeconomics
In the context of principal-agent relationships, moral hazard arises primarily when:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The principal possesses more information about the agent's effort than the agent
- 2The agent has private information about their unobservable actions after a contract is signed✓
- 3The principal can continuously and perfectly monitor the agent's actions
- 4The agent's goals and interests are perfectly aligned with the principal's
Correct answer
The agent has private information about their unobservable actions after a contract is signed
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