A seller of a used car knows more than the buyer about the car's condition.What is this an example of
A)a hidden action; specifically, it is an example of a hidden characteristic
B)a hidden characteristic; specifically, it is an example of a hidden action
C)an information asymmetry; specifically, it is an example of a hidden action
D)an information asymmetry; specifically, it is an example of a hidden characteristic

Question

Quizplus · Accepted Answer

This is an example of information asymmetry, as one party (the seller) has more information than the other (the buyer) regarding the car's condition. More specifically, it is an example of a hidden characteristic, as the quality or condition of the car is not immediately observable or known by the buyer.

A Seller of a Used Car Knows More Than the Buyer