>[!abstract] >In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk knowing that its insurance will pay the associated costs. A moral hazard may occur where the actions of the risk-taking party change to the detriment of the cost-bearing party after a financial transaction has taken place (Wikipedia, 2025). >[!related] >- **North** (upstream): [[Information asymmetry]] >- **West** (similar): [[Adverse selection]] >- **East** (different): [[Risk-sharing alignment]] (when incentives are structured to match risk with responsibility) >- **South** (downstream): [[Excessive risk-taking]] (e.g., in banking or insurance)