A moral hazard problem occurs before a transaction-when people alter their behavior before they
sign a contract, imposing costs on the other party.

Question

Quizplus · Accepted Answer

A moral hazard problem occurs after a transaction or agreement has been made, when one party may change their behavior in a way that is disadvantageous to the other party because they do not bear the full consequences of their actions.

A Moral Hazard Problem Occurs Before a Transaction-When People Alter