Each time a manager changes the conditions of a sale, they must consider the problem of adverse selection.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has access to information that the other party does not, and uses that information to their advantage. Changing the conditions of a sale can affect how information is shared or used, and thus can potentially lead to adverse selection. Therefore, managers must be mindful of this problem when making changes to sales conditions.

Each Time a Manager Changes the Conditions of a Sale