Steven Levitt and Chad Syverson compared home sales in which real estate agents are hired by others to sell a home to instances in which an agent sells his or her own home. They found that homes owned by real estate agents sold for 3
7 percent more than other houses and stayed on the market 9.5 days longer, everything else equal. How could moral hazard explain these results?
Real estate agents often know much more about the housing market than the typical homeowner. Because real estate agents receive only a small share of the additional profit when a house sells for a higher price, there is an incentive for them to convince their clients to sell their houses too cheaply and too quickly.
See Steven D. Levitt and Chad Syverson, "Market Distortions When Agents are Better Informed: The Value of Information in Real estate Transactions," Review of Economics and Statistics, October 2008
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If people are risk averse regarding environmental damages.
a. Low discount rates should be used b. High discount rates should be used c. Expected values will overstate ecological damages d. Irreversible actions should be taken e. They will generally approve of irreversible projects f. All of the above. g. None of the above.
A person who practices poisonous snake charming and does not reveal this to her health insurance company before purchasing insurance is an example of
A) moral hazard. B) adverse selection. C) signaling. D) screening.