eBay, the online auction company, has an impressive portfolio of cooperative agreements. This portfolio includes an agreement with the U.S. Postal Service to facilitate the shipping of goods purchased through eBay auctions, an agreement to allow MBNA to use eBay's name on a credit card, and an agreement in an online auction company in Korea that is supplemented with an investment by eBay in the Korean partner. In addition, at one time eBay had formed an independent firm, called eBay Australia and New Zealand, with an Australian company known as ecorp.
-If, prior to entering the cooperative agreement with eBay, eBay's Korean partner stated that it had the technological capabilities to facilitate eBay's Korean auction business when, in fact, the Korean company did not have these capabilities, this would be an example of

Question

Quizplus · Accepted Answer

Adverse selection refers to a situation where one party in a transaction possesses more information than the other party and has an incentive to misrepresent that information, leading to asymmetrical information. In this case, if the Korean partner stated that it had the technological capabilities to facilitate eBay's Korean auction business when it did not, it would be a case of adverse selection, as eBay was not aware of the partner's lack of capabilities and was misled to enter into the cooperative agreement.

EBay, the Online Auction Company, Has an Impressive Portfolio of Cooperative