Adverse selection or moral hazard

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Anti-lock brakes help prevent cars from skidding out of control when the driver slams on the brakes. For several years, carmakers and insurance companies have been promoting anti-lock brakes as a safety feature. However, a recent study found that accident rates for cars with anti-lock brakes are no lower than for the same model cars without anti-lock brakes. Explain how this finding could be a result of either adverse selection or moral hazard, even if anti-lock brakes do have safety benefits.

Reference no: EM132181304

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