Adverse selection in bargaining comes from:
A) lying to one party or another.
B) principals in the bargaining process.
C) agents in the bargaining process.
D) asymmetric information held by the principal or agent.

Question

Quizplus · Accepted Answer

Adverse selection in bargaining arises from the situation where one party to a transaction has more information than the other, leading to information asymmetry. In this situation, the informed party (either the principal or the agent) has an advantage and can use this to their advantage in the negotiation process, leading to adverse selection. This can result in the uninformed party (usually the other party) making a decision that is not in their best interest.

Adverse Selection in Bargaining Comes From