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

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 2 years ago

Explain why the used car market is both an adverse selection and an asymmetric information problem.

What is the adverse selection problem? How does adverse selection affect the profitable management of an...

What is the adverse selection problem? How does adverse selection affect the profitable management of an insurance company?

Give an example of adverse selection problem and an example of moral hazard problem. Explain how...

Give an example of adverse selection problem and an example of moral hazard problem. Explain how the financial intermediaries can help in avoiding these kind of problems and reducing the cost of asymmetric information.

Explain the concept of adverse selection. How can that lead to market failure?

Explain the concept of adverse selection. How can that lead to market failure? Using the example of insurance markets, outline some ways in which market failure can be avoided or reduced?

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the...

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the structure of the asymmetric problem for each. Football Season Insurance offers to reduce the premium on its auto insurance policies to drivers who install/activate a monitoring device on their cars.

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the...

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the structure of the asymmetric problem for each. You are very busy and hired a service to maintain your lawn. Because of travel, you are unlikely to be home the day they service it.

Information Asymmetry. a. Adverse Selection: In the market for used airplanes, explain how adverse selection might...

Information Asymmetry. a. Adverse Selection: In the market for used airplanes, explain how adverse selection might arise. What might the buyer or seller do to eliminate adverse selection? b. Moral Hazard and the Principal-Agent problem. Suppose you own a real estate office that represents buyers and sellers of residential homes. You hire someone to manage the office for you. What moral hazard issues might you encounter? How does this illustrate the Principle-agent problem, and what could you do to partially...

2 examples of moral hazard and adverse selection. except: Insurance, dating, hiring, loaning money.

Adverse selection can lead to collapse of health insurance market through adverse selection death spiral. Although...

Adverse selection can lead to collapse of health insurance market through adverse selection death spiral. Although adverse selection can be observed in any insurance market, we do not observe adverse selection in many cases. Name reasons why adverse selection may not occur in real markets. Explain each reason

1 Describe a situation in which you experienced or observed the problem of adverse selection. Can you...

1 Describe a situation in which you experienced or observed the problem of adverse selection. Can you suggest any possible solutions that may help correct the problem in this case? Be as specific as possible.

Question

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

Solutions

Expert Solution

Related Solutions

Explain why the used car market is both an adverse selection and an asymmetric information problem.

What is the adverse selection problem? How does adverse selection affect the profitable management of an...

Give an example of adverse selection problem and an example of moral hazard problem. Explain how...

Explain the concept of adverse selection. How can that lead to market failure?

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the...

Determine if the asymmetric information problem is adverse selection or moral hazard. Then briefly explain the...

Information Asymmetry. a. Adverse Selection: In the market for used airplanes, explain how adverse selection might...

2 examples of moral hazard and adverse selection. except: Insurance, dating, hiring, loaning money.

Adverse selection can lead to collapse of health insurance market through adverse selection death spiral. Although...

1 Describe a situation in which you experienced or observed the problem of adverse selection. Can you...