Moral Hazard in Economics

Moral hazard may be present any period two parties be given agreement against each other. Each party in a contract may have the opportunity to gain from acting despite the principles organized by the contract. For example, when a dealer is paid an appartment salary with no commissions with regard to their sales, there is a danger that the salesperson may definitely not try hard to market the business owner’s goods because the wage stays the same regardless of how much or how little the master benefits from salesperson’s work.