explain why dating can be considered a method to solve the adverse selection problem.

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Expert Solution

Adverse selection refers to situation underlying which the buyer posses more information when compared with the seller. In the world of insurance, adverse selection generally states that a smoker will be ascertaining greater value out of health insurance making the smoker more likely to get into it and increasing the premium associated with insurance for everyone. Such an arrangement will discourage non smoker to go for health insurance due to increase in premium. Consider dating service underlying which the people that feel incapable or afraid of meeting the partner on free dating website or in person for any reason end up making payment towards monthly fee. However if the prospective candidate end up having great ratio for uncouth, mean or unattractive individual then the available number of singles that have enrolled in dating service tend to scare away the potential good candidates. Thus dating helps in solving adverse selection issue as it help the individual in deciding what information is required to be disclosed to another partner

jeff jeffy answered 1 year ago

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