Suppose a home owner is selling their home and they are aware that the basement has a severe drainage problem and the potential buyers do not have this information. This is an example of_______ .

Question

Quizplus · Accepted Answer

This scenario presents asymmetric information, as one party (the home owner) has more knowledge about the condition of the home than the other party (the potential buyers). This type of information asymmetry can lead to adverse selection, as the buyers may not be willing to pay as high a price for the home if they knew about the drainage problem.

Suppose a Home Owner Is Selling Their Home and They