All of the following statements are solutions to an adverse selection problem caused by seller's having private information EXCEPT
A)sellers can signal quality.
B)third-party verifiers can provide information to buyers.
C)the government can provide information or weed out low-quality goods.
D)buyers can signal quality.

Question

Quizplus · Accepted Answer

Adverse selection problems arise when one party in a transaction has more or better information than the other, typically the seller knowing more about the product quality than the buyer. Solutions to this problem involve mechanisms to transfer information from the informed party to the less informed party or to ensure quality. Sellers signaling quality, third-party verifiers providing information, and government intervention are all ways to address the information asymmetry from the seller's side. However, buyers signaling quality does not address the issue of sellers having private information about the product, as it involves actions from the buyer's side to indicate their own characteristics or intentions, not the product's quality.

All of the Following Statements Are Solutions to an Adverse