Describe ex ante moral hazard and ex post moral hazard. Is moral hazard always bad?
Describe ex ante moral hazard and ex post moral hazard. Is moral hazard always bad?
Homework Answers
Moral hazard is the lack of incentive for the person to guard against the risk for which the person is protected or insured. Ex ante means before the event and ex post means after the event has happened.
Ex-ante moral hazard occurs when the person who is insured take less efforts as the insured don't have to pay from his pocket thereby making the event more likely. On the other hand ex-post moral hazard occurs when the event happens and insured person makes recovering more expensive.
Moral hazard arises because of the asymmetric information to both the parties and creates scope for a party to engage in some undesirable activities from the point of view of the other party. So, it is bad for the other party.
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Describe ex ante moral hazard and ex post moral hazard. Is moral
hazard always bad?
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In the context of health care insurance, what is the moral hazard?
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