When those on the informed side of a market self-select, the problem of __________ occurs.

Name: When those on the informed side of a market self-select, the problem of __________ occurs.
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Question

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Adverse selection occurs when those with better information self-select out of a market, leaving only those with worse information to participate. This results in a market where buyers or sellers may be more likely to have negative outcomes because the better informed parties have opted not to participate.

When Those on the Informed Side of a Market Self-Select