Explain and discus both the differences and similarities between:
(i) moral hazard;
(ii) adverse selection;
(iii) the principal-agent problem.
First off, let’s define what these are with short examples:
(i) Moral hazard differs because the behavior is based on information about the economic actor being protected from the consequences of the action taken. An example would be if you didn’t take care of your dental hygiene because you didn’t have good dental insurance.