Nate is a recent graduate who states that he has interned at a major accounting firm so that his value as a candidate for employment increases. A start-up recruits Nate based on his stated credentials without verifying them. Two days into the job, Nate's team lead realizes that Nate does not know much of what he claimed to know during the interview. This scenario best exemplifies

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This scenario best exemplifies adverse selection. In general, adverse selection occurs when information asymmetry increases the likelihood of selecting inferior alternatives. In principal-agent relationships, for example, adverse selection describes a situation in which an agent misrepresents his or her ability to do the job.

Nate Is a Recent Graduate Who States That He Has