The Argument for Moral Hazard in Practice
{"Image DocumentName": "The Argument for Moral Hazard in Practice", "Image ImageDescription": "Depositors need not view risk as a primary consideration when choosing banks \u2013 moral hazard effect on the margin. Free-riding/collective action monitoring problem can be resolved through ex ante premium payment to depositors. Even if depositors conduct more research before choosing bank then once their money has been deposited, banks constantly need to attract new depositors who will in turn provide needed monitoring at investment decision phase. Higher premium payments will send important signal to management/shareholders and this disciplinary mechanism can serve as a substitute to deposit withdrawal. Withdrawal of funds is not costless and may cost more than investing in research to determine validity of bank rumors. See Macey and Garrett, 5 Yale J. on Reg. 215.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}