Student Solution

-->

"Education is the most powerful weapon which you can use to change the world”
– Nelson Mandela

1 University

1 Course

1 Subject

Download Solution

Related Solution

Week 8 - Discussion...
During the phase of the whole semester, I have gained lots of knowledge and developed learning experiences about the role of tools and methods of information systems that are executed in a business pr...

Week 8 - Discussion Board
Week 8 - Discussion Board

During the phase of the whole semester, I have gai

Journal Assignment W...
This is a story about Jerry and his outlook on life and how he treats every situation that comes his way. This story means a lot to me because me. Jerry had one goal which he lives by, always see the...

Journal Assignment Week 2
Journal Assignment Week 2

This is a story about Jerry and his outlook on lif

Module 1 Discussion_...
Part I The determinants of difference between data, information, and knowledge are technicality and application. Although these three terms are more or less used as synonyms of each other, the...

Module 1 Discussion
Module 1 Discussion

Part I The determinants of difference betw

Managerial Economics_Module 8 Assignment

Managerial Economics_Module 8 Assignment

Q 1. Explain how information asymmetry creates the problem of adverse selection. 2. Distinguish between risk-neutral and risk-averse behavior in decision-making. 3. Recommend methods for companies wanting to increase their information about potential high-risk customers. 4. Describe how effective signaling allows information to be shared for better outcomes for both parties. 5. Explain the problem of moral hazard.

View Related Questions

Solution Preview

View Complete Solution
Incomplete markets, adverse selection can be led by asymmetric information. This is a kind of failure in the market. Asymmetry of information in economics and theory of contract deals with the decisions study in transactions in which better or more information is held by one party in comparison to other. A power imbalance is created in transactions by this asymmetry that can lead to transactions being crooked, a type of failure in the market in the worst situation. A situation is explained by the adverse selection in which asymmetric information affects the participation in the market (Spaulding, 2019).