Adverse selection

A situation where market participation is affected by asymmetric information.

Asymmetric Information and Health Insurance

In this video, we discuss asymmetric information, adverse selection, and propitious selection in relation to the market for health insurance. Health insurance consumers come in a range of health, but to insurance companies, everyone has the same average health.

Asymmetric Information and Used Cars

George Akerlof, a Nobel Prize-winning economist, analyzed the theory of adverse selection – which occurs when an offer conveys negative information about what is being offered.
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