Short answer Moral hazard versus adverse selection Principle-agent problem Lemons example.

Short answer
1. Moral hazard versus adverse selection
2. Principle-agent problem
3. Lemons example.

Expert Solution

(a) moral harzard versus adverse selection

When before closing a deal there is asymmetric relationship between buyer and seller this is known as adverse selection

Whereas when after closing a deal there is asymmetric relationship between buyer and seller it is known as moral hazard

(B) principle agent problem

It is a situation when an entity nor a person is able to make decisions on the behalf of another person it is known as principal agent problem . When one person decison impacts the other person then pricipal agent problem arises.

(C)lemons example

When the quality of goods traded in the Market are the reasons to degrade the problem on the basis of asymmetric information between buyers and sellers

Rahul Sunny answered 2 years ago

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Short answer Moral hazard versus adverse selection Principle-agent problem Lemons example.

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