Home cleaning services and general contractors often advertise that they are bon
ID: 1203114 • Letter: H
Question
Home cleaning services and general contractors often advertise that they are bonded. What this means is that the seller of the service has put up money with a third party that is available to the buyer if, for example, the cleaners damage or steal property or if the general contractor fails to complete the project or completes it in a substandard way. What is the purpose of bonding?
Bonding provides a good incentive for the contractor to engage in adverse selection.
$400 without insurance, $800 with insurance, $800 paid by the insurance company.
five without insurance; Six with insurance.
Home cleaning services and general contractors often advertise that they are bonded. What this means is that the seller of the service has put up money with a third party that is available to the buyer if, for example, the cleaners damage or steal property or if the general contractor fails to complete the project or completes it in a substandard way. What is the purpose of bonding?
Bonding provides a good incentive for the contractor to not engage in the moral hazard of theft or failing to complete the project. Bonding provides a good incentive for the contractor to engage in the moral hazard of theft or failing to complete the project. Bonding provides a good incentive for the contractor to not engage in adverse selectionBonding provides a good incentive for the contractor to engage in adverse selection.
Explanation / Answer
"Adverse selection occurs when there's a lack of symmetric information prior to a deal between a buyer and a seller, whereas moral hazard occurs when there is asymmetric information between two parties and change in behavior of one party after a deal is struck." Answer is Option 4.
Note: Please ask the other questions as different questions.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.