Match each scenario with one of the following choices: Perverse Incentives, Moral Hazard, "Law" of Unintended/Unforeseen Consequences. Single choice

A bank profits from offering very high interest, uncollateralized loans to people with poor credit ratings, knowing that the federal government will not allow the bank to fail and hurt people who have trusted the bank with their savings.

A bank profits from offering very high interest, uncollateralized loans to people with poor credit ratings, knowing that the federal government will not allow the bank to fail and hurt people who have trusted the bank with their savings.

The parents of 6-year-old Sadie and 3-year-old Bennie offer candy to the children as a reward for cleaning up their play area and putting away their toys. They do the cleanup and get their reward. While enjoying their candy, Sadie slyly whispers to Bennie, "Tomorrow we will make another mess and get more candy!"

In 1920, the 18th Amendment to the Constitution banned the sale and use of alcohol throughout the United States, with the goal of reducing serious crimes. However, crime skyrocketed, including the rise of organized criminal gangs who supplied alcohol in an underground economy and protected their "territories" through murder, assault, extortion and threats.

Perverse Incentives

"Law" of Unintended/Unforeseen Circumstances

Moral Hazard