Adverse selection can occur when
A) all parties have full information.
B) one party has information not available to the other party.
C) information is not full but both parties have the same information.
D) incentives result in one party not reaching an agreement with the other party.
E) nobody has any information.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party has information not available to the other party. This information asymmetry can lead to the party with more information taking advantage of the situation and potentially harming the other party.

Adverse Selection Can Occur When