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okay hello and welcome everyone in this video Im gonna talk about motivation and contract theory but really what this is gonna be all about is following up with our discussion of asymmetric information and in a previous video I discussed Akerlof smark it for lemons application through through variant thinking about adverse selection and markets when buyers cant observe good or bad quality for whatever theyre buying in this lecture Im gonna talk about the opposite problem which is the problem of moral hazard where for instance you have some principle that has some interest that youd like the agent to be able to follow through on may be an employer that would like an employee to work hard and you have this problem where the employee might might shirk so the problem of moral hazard its a problem that happens after the transaction where the agent fails to take adequate precaution maybe operates or acts opportunistically this is like if you have car insurance and then you take more r
