One of the ways of overcoming the problem of adverse selection is through:
A)signaling.
B)bargaining.
C)free-riding.
D)costless contracting.

Question

Quizplus · Accepted Answer

Signaling is a way for parties to communicate their private information to others, in order to overcome the problem of adverse selection. By using signals, individuals can show that they have certain characteristics (such as high quality or low risk) that would otherwise be difficult to observe. This helps to reduce the information asymmetry between buyers and sellers, and can improve the efficiency of markets. Bargaining, free-riding, and costless contracting are not specifically designed to address the issue of adverse selection.

One of the Ways of Overcoming the Problem of Adverse