Which of the following is an example of signaling in a market with asymmetric information?
A) The certification of used cars by third parties
B) Rent controls imposed by government
C) Discounts offered by sellers during the holiday season
D) The taxation of alcoholic beverages

Question

Quizplus · Accepted Answer

The certification of used cars by third parties is an example of signaling in a market with asymmetric information because the seller has more information about the condition of the car than the buyer. By obtaining certification from a third party, the seller is signaling to the buyer that the car is in good condition, which helps to mitigate the information asymmetry between the two parties.

B) Rent controls imposed by government are not an example of signaling in a market with asymmetric information.

C) Discounts offered by sellers during the holiday season are not an example of signaling in a market with asymmetric information.

D) The taxation of alcoholic beverages is not an example of signaling in a market with asymmetric information.

Which of the Following Is an Example of Signaling in a Market