An uninformed party can use ________ to learn about the information held by the informed party.

Question

Quizplus · Accepted Answer

Screening is the process by which an uninformed party can learn about the information held by an informed party. This can be done through testing, background checks, reference checks, or interviews. This helps to mitigate the problem of adverse selection, where an uninformed party may only see the low-quality options available to them. By screening potential options, the uninformed party can have greater confidence in their choice. Signaling refers to the informed party using observable characteristics to communicate their quality, rather than the uninformed party actively seeking out information. A warranty is a guarantee provided by the seller that the product will perform as expected, but it does not help an uninformed party to learn about the quality of the seller or the product before the purchase. Educational attainment is not directly related to the problem of information asymmetry between two parties.

An Uninformed Party Can Use ________ to Learn About the Information