Question
In: Economics
Short answer Moral hazard versus adverse selection Principle-agent problem Lemons example.
- Short answer
- Moral hazard versus adverse selection
- Principle-agent problem
- Lemons example.
Solutions
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 agoRelated Solutions
The lemon's problem is a moral hazard problem and the principle agent problem is an adverse...
The lemon's problem is a moral hazard problem and the principle
agent problem is an adverse selection problem.
True
False
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What are adverse selection and moral hazard?
What are adverse selection and moral hazard?
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Identify each of the following as an adverse selection or a moral
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In each of the following cases, identify whether the problem is
adverse selection or moral hazard, and explain your answer. How
might the problem be dealt with?
Rick has gotten a large advance to write a textbook. With the
money in hand, he prefers spending his time sailing rather than
sitting in his office working on the book.
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Do
you think we live in a more moral hazard society versus adverse
selection?
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