An example of adverse selection is

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other party, which can lead to a situation where only the party with negative information chooses to engage in the transaction. In this case, purchasing additional dental insurance is an example of adverse selection because the individual knows they have bad teeth and are therefore more likely to use the insurance, whereas someone without dental problems might not feel the need to purchase extra insurance.

An Example of Adverse Selection Is