Industrial Growth and Competition Essay Example | Topics and Well Written Essays - 500 words

Industrial Growth and Competition - Essay ExampleMoral hazard originated in the restitution industry where Insurance firms realized that by protecting their customers from risks, they might be encouraging risky behaviors. In cases where there are high potential claims, an insurance firm will charge higher premiums. A moral hazard exists in these situations (Winter 2013)Lack of shared information One party may come to pass to possess more information than the other party. For instance, a company selling investments may be certified that it will not succeed in the next two years based on its performance. Investors put in the firm due to lack of enough information may think that the company is doing well.Principal-agent line of work When an agent or insurance broker is not in alignment with the individual it represents, moral hazards croupe exist. For instance, an insurance agent may recommend a bigger policy if that is the way of getting a special bonus.In some situations, the me mbership of the Euro may cause some moral hazards. A awkward in the community may imagine that if it faces many challenges, the other members will bail it out. For instance, a kingdom may decide to grow its debts knowingly. When Greece joined the Euro, it took advantage of low-interest rates because of its membership in the Euro. The low-interest rates boost the country to keep take overing until it realized too late that the country had borrowed too much. Greece continued to borrow knowing that it enjoyed low interest rates because of its membership in the Euro (Dam & Koetter 2012).If an individual has not insured his house, it implies that he will suffer losses in case of burglary or fire. An individual will be compelled to be careful by installing burglar alarms and employ guards to evade any unexpected event (Jaspersen & Richter 2015). In case a house is insured for its full value, if any bad