Adverse selection implies that:

Question

Quizplus · Accepted Answer

Adverse selection refers to a situation where higher-quality goods or services are crowded out by lower-quality ones in a market. In the context of used cars, adverse selection means that the market will contain more cars of lower than average quality. This is because buyers are likely to be more interested in purchasing less expensive cars, which tend to be of lower quality, while sellers of higher-quality cars are less likely to sell them in a market where they cannot get a good price.

Adverse Selection Implies That