The Behavioral Economics in Marketing’s Podcast Moral Hazard | Definition Minute
Jul 6, 2021
A crisp definition of moral hazard and why protection can change behavior. Short takes on how safety nets encourage risk and reduce vigilance. Everyday examples like insurance, tenure, and salaried roles bring the concept to life. A quick preview of related incentives and the principal–agent link.
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How Protection Changes Behavior
- Moral hazard happens when someone protected from risk behaves differently than if they bore the consequences.
- This dynamic creates incentives to take more risks or to neglect guarding against harm.
Everyday Examples Of Risky Behavior
- Sandra gives everyday examples like tenured professors skipping lectures and salaried employees taking long breaks to illustrate moral hazard.
- She also notes people take more risks when they hold insurance that covers consequences.