Q
what is moral hazard, is it there if each of them knows everything that could
possibly happen, which with no insymmetric information and free to choose
sides?
since it could be solved by a contract,
might it aren't moral hazard in the first place.
the losses of x are somehow able to internalize(penalty),
then it could be solved.
A
the point is that it is the choice between risk and effort to reduce it and
their costs to do or not to do so, and since the efforts ever made to reduce
risk is UNobservable to the Y party, there are chances for moral hazard.
^^^^^^^^^^^^^^^
Ys is a predetermined number, while Xs is also a predetermined number but
also uncertian of what it will turn out to be, since whether you meet
a highway robber or not is risk, ehich is outside of k.
but,chances for the sucess of robbery once X encounters it depends on
whether X paid efforts to protect as well, but efforts or not is what
Y can't tell apart by the quantity of Xs sucessfully sent to Y's hands.
the relative price of X/Y is the inverse of Xs/Ys
all Xs sucessfully sent to Y are traded for all Ys, therefore dual prices
that penalizes/internalize X to bear the cost-bentfit choice. and this price
is the very same price from the Xs and Ys
not in exact words, and unable to write down in chinese.
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