>[!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)