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THE principle of “moral hazard” is well known to economists. It refers to the idea that people act differently when they are not fully exposed to an action’s costs. (An often-cited example is that people with good house insurance will be more likely to leave their doors unlocked.) Business travellers face their own version of moral hazard. When a company is footing the bill, the temptation is to spend more flights and accommodation than is needed.

A new startup thinks it has a solution. Upside, which has been launched by Jay Walker, the founder of Priceline, a big travel site, will offer gift cards to business travellers who are willing to save their employers money by, for example, staying at a hotel farther from the centre of town or flying at a less popular time.

It is a nifty idea, although it has its downsides. Many travellers prefer not to cut corners on business trips, particularly if it means spending longer in the air. (Mr Walker told the Skift website that “There is pretty much no business…Continue reading

First published here: http://j.mp/299O5ti