What potential economic problem can arise with a guaranteed payment contract for professional athletes that is not related to performance?
Please provide the best answer for the statement.
The problem is one of a moral hazard. If the athletes have a guaranteed payment contract unrelated to their performance, then they get paid no matter how they well or poorly they perform. The guarantee may reduce the incentive to perform well in competition. In many cases, contracts for professional athletes include clauses that offer bonuses for achieving high standards of performance, thus helping to counter the moral hazard problem with a guaranteed payment that is not based on performance.
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An economic model suggests that for every additional year of education, the future wages increase by 5 percent
If Richard, with 12 years of education, earns $20 per hour, how much will he earn per hour if he decides to undertake four additional years of education?
The table above shows the payoff matrix offered to two suspected criminals, Bonnie and Clyde. The payoffs are the years they will spend in prison. The suspected criminals are not allowed to communicate
Given the information in the payoff matrix, the Nash equilibrium is that Bonnie ________ and Clyde ________. A) confesses; denies B) confesses; confesses C) denies; denies D) denies; confesses E) denies; either confess or denies, either outcome is consistent with the Nash equilibrium.
Education of girls is a crucial development investment because
(a) it leads to improved child health. (b) it leads to reduced fertility. (c) women do most of the work in agriculture. (d) all of the above.
Economists make the general assumption that:
A. people are rational, but their behavior doesn't always follow this assumption. B. people are irrational, but there are some correlations in behavior that have been proven. C. people are rational, but this doesn't really ever resemble reality. D. people are irrational, but this is too difficult to put into a model.