When an agent tries to exploit an information advantage in a dishonest way, it is called:
A) adverse selection.
B) moral hazard.
C) signaling.
D) information asymmetry.

Question

Quizplus · Accepted Answer

Moral hazard refers to when an agent takes advantage of an information asymmetry in a dishonest way. Adverse selection is when one party has more information than the other before the transaction, signaling is when one party sends a signal to the other to convey private information.

When an Agent Tries to Exploit an Information Advantage in a Dishonest