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Using Both Sociological And Economic Incentives To Reduce Moral Hazard

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  • Richter, Francisca G.-C.
  • Diaz, Edgar F. Pebe
  • Brorsen, B. Wade
  • Currier, Kevin

Abstract

Economists tend to focus on monetary incentives. In the model developed here, both sociological and economic incentives are used to diminish the apparent moral hazard problem existing in commodity grading. Training that promotes graders' response to sociological incentives is shown to increase expected benefits. The model suggests that this training be increased up to the point where the marginal benefit due to training equals its marginal cost. It may be more economical to influence the grader's behavior by creating cognitive dissonance through training and rules rather than by using economic incentives alone.

Suggested Citation

  • Richter, Francisca G.-C. & Diaz, Edgar F. Pebe & Brorsen, B. Wade & Currier, Kevin, 2003. "Using Both Sociological And Economic Incentives To Reduce Moral Hazard," 2003 Annual Meeting, February 1-5, 2003, Mobile, Alabama 35009, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeatm:35009
    DOI: 10.22004/ag.econ.35009
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    References listed on IDEAS

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