Editing Moral hazard (section)

==Managerial economics==
In the field of managerial economics, moral hazard refers to a situation in which an individual or entity engages in risky behaviour due to the knowledge that the costs associated with such behaviour will be borne by another party. This phenomenon often arises in the presence of information asymmetry, where one party possesses more information than the other. For instance, within an employment relationship, an employee may engage in risky behaviour with the understanding that any negative consequences will be absorbed by their employer. To mitigate the moral hazard, firms may implement various mechanisms such as performance-based incentives, monitoring and screening to align the interests of both parties and reduce the likelihood of risky behaviour.<ref>{{cite journal |last1=Eisenhardt |first1=Kathleen M. |title=Agency Theory: An Assessment and Review |journal=The Academy of Management Review |date=January 1989 |volume=14 |issue=1 |pages=57–74 |doi=10.2307/258191 |jstor=258191 |url=https://journals.aom.org/doi/abs/10.5465/amr.1989.4279003}}</ref>