Illustrate the inherent wastefulness of signaling

Reference no: EM131309567

In the late 1800s "wildcat banks," which were easy to charter and largely unregulated, sprang up across the American West. Some new banks chose to operate out of simple and inexpensive wooden structures, but others built elaborate buildings out of stone, with lots of gilding and other adornment.

a. Explain how the variety of building types that sprung up can be attributed, at least in part, to the potential for moral hazard.

b. Explain how the building choices of bankers in late 1800s America illustrate the inherent wastefulness of signaling.

Reference no: EM131309567

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