Lenders should worry about both adverse selection and moral hazard

This piece argues that Income Contingent Lending reduces adverse selection and moral hazard relative to Income Sharing Agreeements (RealClearEducation, July 2020).

Adverse Selection, Moral Hazard, and Hidden Costs in the Self-Checking Line

Self-checking makes theft easier (WSJ, Feb. 2020).

1. Who is more likely to self-check, an honest person or someone who is inclined to minor theft if the chance of detection is low?
2. When is an honest person more likely to engage in minor theft: when a self-check machine goofs or when they are in front of a cashier?
3. Do you think that stores accurately anticipated the additional shrinkage created by self-checking?

How do All-You-Can Eat Buffets Minimize Moral Hazard?

This story describes tricks all-you-can-eat buffets use to keep diners from eating all the profits.

Incentives for Public School Teachers in the D.C.

"screening mitigated both the adverse selection and the moral hazard problems and not by small amounts" (https://managerialecon.blogspot.com/2013/10/michelle-rhees-tenure-as-washington-dcs.html).

Some of the comments fear that cheating by teachers may account for some of the increase in measured performance.

Moral Hazard in Organ Transplants

This essay describes a moral hazard problem in organ transplants. 

"Transplant programs are not evaluated by regulatory agencies to determine how well they use the organ donors available to them. Instead, they are judged primarily on how many of the patients they transplant are alive one year after surgery—an important but limited metric. The emphasis on one-year survival makes transplant programs overly cautious, letting viable organs go unused instead of using organs that they fear might harm their report card."

The essay includes an example. A surgery team turned down lungs that were good but not great matches for Patient A because another Patient B who had received a transplant had recently died. Patient A subsequently died while waiting for a match.

The emphasis on survival rates also reduces the propensity of doctors to transplant organs into patients who are likely to die within a year; e.g., patients who are old and weak and patients who suffer from other life-threatening diseases.