After reading this article here, I began wondering whether we are seeing moral hazard at work with the fradulent use of disabled parking placards. People abusing the use of parking placards, which are intended for people who are by medical defintion physically disabled, are taking advantage of their information asymmetry (i.e. they are taking advantage of privacy laws that prohibit the DMV from asking “a motorist why he or she has a placard.”).
Now that California has decided to crack down on the placard fraud through sting operations, will we see people alter their behavior of using the placard? After all, if you are found to be using the placard illegally, it will be taken from you, meaning the person from whom you borrowed it will lose it.
What are some of the potential costs as a result of placard fraud? One that comes to mind is a person who is not disabled taking away a spot from someone who actually needs that specially reserved spot.