What method is often used when both parties want to eliminate information asymmetry?
A) Screening.
B) Signaling.
C) Statistical discrimination.
D) Moral hazard.

Question

Quizplus · Accepted Answer

Signaling is the method used when both parties want to eliminate information asymmetry. It involves one party providing information that will demonstrate their credibility or willingness to take on risk, thus signaling their true intentions to the other party. This can help both parties make more informed decisions and avoid potential pitfalls that may arise from asymmetrical information. Screening is a method used by one party to determine the quality or reliability of the other party, rather than by both parties to eliminate information asymmetry. Statistical discrimination and moral hazard are not methods used to eliminate information asymmetry, but rather are related concepts in economics.

What Method Is Often Used When Both Parties Want to Eliminate