$$Steve is a Shih Chien University USC professor. He has just inherited a small cattle ranch in Kaohsiung and wishes to hire a person to operate and manage the ranch. Steves duties at USC will preclude him from visiting the ranch or communicating often with the operator. Does Steve face problems of moral hazard andor adverse selection in this employment relationship? Explain your answer in such a way that it is clear that you understand what each of these concepts means. If you believe Steve has a problem, try to mention one or two things he might do to mitigate or reduce the problem.

 

Answer rating: 100% (QA)

Steves Hiring Dilemma Moral Hazard and Adverse Selection Steve faces both moral hazard and adverse selection problems when hiring a ranch operator due ... View the full answer