<p>Actually, in my course slides that the unique difference is that under hidden information, the principal's profit and effort of manager is one to ine, under moral hazard,  the profit is unrelated to the  effort  of manager. </p>

CC BY-SA 4.0
2019-04-27T08:00:21.240Z
2019-04-27T08:00:21.240Z
deja
<p>Hidden information concerns <strong>characteristics that are unobservable</strong> by one side of the market. For example, a consumer's willingness to pay, a worker's productivity, the quality of a used car all fall under this category. The characteristics in question are typically assumed to be fixed or very costly to modify. </p>

<p>Moral hazard concerns <strong>actions that are unobservable</strong> by one side of the market. For example, the effort that a CEO puts into managing a company and the care that an insured driver takes to maintain the condition of his car both fall under this category. By their very nature, the (unobservable) actions can be easily changed to suit the incentive structure of the problem. </p>

CC BY-SA 3.0
2018-03-14T03:17:36.613Z
In moral hazard, effort is unobservable, okay. Well, in hidden information, type is unobservable? when I think the agent principal problem. Please expand the hidden information. I am confused hidden action.
b11bb
CC BY-SA 3.0
2018-03-14T03:20:20.910Z
What is the principal ‘s problem for these two especially for hidden information.
b11bb
CC BY-SA 3.0
2018-03-14T03:35:40.157Z
In fact I have onequestion. For hidden information, in the class, it is said that when does the agent learn his type? Two cases: post contractual And pre contractual. What I understand is that at first the agent does not know his own type. That is type is private info. according to contract signing time, the agent learn his type. If post contractual, agent learn his type after signing. if pre contractual, the agent learn his type before signing contract for example by interview or sitting a test etc. Right?
b11bb
CC BY-SA 3.0
2018-03-14T03:36:26.740Z
Sorry I asked too much question but I cannot understand the hidden information for the agent principal problem in fact. Thank you for helps.
b11bb
CC BY-SA 3.0
2018-03-14T16:13:26.430Z
@studying1234: I'm sorry but your comments are a little confusing for me. Whether the agent learns his type before or after signing the contract does not change the key features of hidden information: types are privately observable and cannot be changed, while actions are observable.
Herr K.
CC BY-SA 3.0
2018-04-28T19:28:04.640Z
@herryk. What you think about this question? Please let me tell your opinions Thank you https://economics.stackexchange.com/questions/21713/the-relationship-between-gross-profit-and-tax
b11bb
CC BY-SA 3.0
2018-03-13T05:06:28.640Z
2018-03-13T05:06:28.640Z
Herr K.
<p>What is the difference between hidden information and moral hazard?</p>

<p>I cannot understand these two terms mainly. Please explain. Thank you. </p>

<microeconomics><game-theory><self-study><adverse-selection>
Moral hazard vs hidden information.
b11bb
# Moral hazard vs hidden information.

(Asked by: username_0 on 2018-03-12)

What is the difference between hidden information and moral hazard?

I cannot understand these two terms mainly. Please explain. Thank you.

**Tags:** microeconomics, game-theory, self-study, adverse-selection


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## 2 answers

### Answer by username_2 on 2018-03-13. Score: 6 | Accepted answer

Hidden information concerns **characteristics that are unobservable** by one side of the market. For example, a consumer's willingness to pay, a worker's productivity, the quality of a used car all fall under this category. The characteristics in question are typically assumed to be fixed or very costly to modify.

Moral hazard concerns **actions that are unobservable** by one side of the market. For example, the effort that a CEO puts into managing a company and the care that an insured driver takes to maintain the condition of his car both fall under this category. By their very nature, the (unobservable) actions can be easily changed to suit the incentive structure of the problem.

> **Comments:**
> **username_0**: In moral hazard, effort is unobservable, okay. Well, in hidden information, type is unobservable? when I think the agent principal problem. Please expand the hidden information. I am confused hidden action.  
> **username_0**: What is the principal ‘s problem for these two especially for hidden information.  
> **username_0**: In fact I have onequestion. For hidden information, in the class, it is said that when does the agent learn his type? Two cases: post contractual And pre contractual. What I understand is that at first the agent does not know his own type. That is type is private info. according to contract signing time, the agent learn his type. If post contractual, agent learn his type after signing. if pre contractual, the agent learn his type before signing contract for example by interview or sitting a test etc. Right?  
> **username_0**: Sorry I asked too much question but I cannot understand the hidden information for the agent principal problem in fact. Thank you for helps.  
> **username_2**: @studying1234: I'm sorry but your comments are a little confusing for me. Whether the agent learns his type before or after signing the contract does not change the key features of hidden information: types are privately observable and cannot be changed, while actions are observable.  
> **username_0**: @herryk. What you think about this question? Please let me tell your opinions Thank you https://economics.stackexchange.com/questions/21713/the-relationship-between-gross-profit-and-tax  

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### Answer by username_1 on 2019-04-27. Score: -2

Actually, in my course slides that the unique difference is that under hidden information, the principal's profit and effort of manager is one to ine, under moral hazard, the profit is unrelated to the effort of manager.


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