A promoter arranges for many different restaurants to set up booths to sell Cajun-Creole food at a fair. Appropriate music and other entertainment are provided. Restaurants agree to pay a share of their earnings to the promoter, but the promoter cannot monitor how much business each restaurant does. However, the promoter requires that customers can buy food using only “Cajun Cash,” which is scrip with the same denominations as actual cash sold by the promoter at the fair. How does Cajun Cash solve a potential moral hazard problem that might arise between the promoter and the restaurants?

  • CreatedNovember 13, 2014
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