When a transaction takes place repeatedly,then one way to signal to avoid information asymmetry is:
A) building a reputation.
B) screening.
C) statistical discrimination.
D) Any of these could be true.

Question

Quizplus · Accepted Answer

Building a reputation is the best way to signal to avoid information asymmetry when a transaction takes place repeatedly. Reputation acts as a signal that conveys information about the trustworthiness and reliability of the parties involved in the transaction. In repeated transactions, parties have the opportunity to observe and evaluate each other's behavior, which helps in building trust and a positive reputation. This reduces the information asymmetry problem and reduces the likelihood of opportunistic behavior in future transactions. Screening and statistical discrimination may also be helpful, but building a reputation is the most effective way to signal trustworthiness in repeated transactions.

When a Transaction Takes Place Repeatedly,then One Way to Signal