Tag: moral hazard

All the Bacon and Eggs

2017

Ron isn’t happy with the steak he was served, so instead he asks the waiter to give him all the bacon and eggs they have. While a bit extreme, his preferences and utility function should be respected in society despite the potential for future health issues.

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Andy Needs a Doctor

2017

Andy hits his head against the wall, but can’t afford to go see a doctor. He hasn’t had insurance for two years because he thinks he only needs it for when something bad happens. Moral hazards often arise when one party takes on more risk because they are insured.

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