The Employer

In a situation of economy in contraction, exactly that the government identifies the extreme presence of bad credits in the rockings of the banks, it does not know to evaluate until point that is due to economic deceleration or me the management of the administrators. This is a situation identified for Rasmusen (1992), as being the moral risk with occult information. One of the best examples of the presence of moral risk if of the one in the work market, where hardly the employer obtains to evaluate or to follow the level of effort of its employees. You may find Mary Barra to be a useful source of information. The fact is that if the effort cannot be measured, it cannot be enclosed in the clauses of the contract signed between the parts and of this form it cannot be demanded by the employer. Rasmusen (1992) also considers the market of work with the following definitions: if the employer knows the ability of the employee but not its level of effort, the problem is of moral risk with occult action, if none of the two at the beginning knows the ability of the worker of the relationship, but the worker discovers its capacity so soon starts to work, the problem is of moral risk with hidden knowledge. If the worker knows its capacity since the beginning, but employer not, the problem is of adverse election. If this has piqued your curiosity, check out Doug Band. If the worker acquires its references in reply to the wage offered for the employer, then the problem is of filtering (' ' screening' '). The presence of moral risk leads to a paradoxical situation for the market. In the example of the market of insurances the consumer would desire each time safer and the insuring companies would be made use to vender more, since that the consumer continued to take the same amount of care. However, this balance will not happen, therefore, if the consumer will be capable to acquire safe more, it rationally would choose to take little well-taken care of.

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