Moral Hazard
25 July 2008 at 10:01 am Peter G. Klein 2 comments
| Peter Klein |
Ten-year-old child wants a mobile phone. Parent buys a basic, inexpensive model with a pay-as-you-go plan. Child loses phone.
Parent: “You see, I thought that might happen, which is why I got you a cheap phone that’s easily replaceable and not one of those fancy, expensive ones you’re always asking for.”
Child: “But if I had a fancy one, I would have been more careful not to lose it.”
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Organizations and Markets 
1.
Samir | 25 July 2008 at 4:17 pm
So true…I actually have friends, when I was younger, who have done something similar. I remember one who “accidentally” broke his golf club so that he could get a new, nice one.
2.
Rafe Champion | 25 July 2008 at 6:26 pm
a) Some entrepreneur could make a cheap phone that looks and feels like an expensive one.
b) Make the little varmints save up out of their meagre pocket money, defer gratification and pay for their own phone (cheap or expensive according to taste).