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 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.


Issue Date:
2003-08
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/31096
Published in:
Journal of Agricultural and Resource Economics, Volume 28, Number 2
Page range:
364-373
Total Pages:
10




 Record created 2017-04-01, last modified 2017-08-24

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