Using Both Sociological And Economic Incentives To Reduce Moral Hazard
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.
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- Allen, Douglas W. & Lueck, Dean, 1999. "Searching For Ratchet Effects In Agricultural Contracts," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(02), December.
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Staff General Research Papers
10672, Iowa State University, Department of Economics.
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- Edward Simpson Prescott, 1999. "A primer on moral-hazard models," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 47-78.
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