Moral hazard and adverse selection are both examples of

Question

Quizplus · Accepted Answer

Moral hazard and adverse selection both involve situations where one party in a transaction has information that the other party does not have, creating asymmetric information. This is a common problem in markets and can lead to inefficiencies or other issues. The principal-agent problem is related to this issue as well, but is a broader concept that encompasses situations where one party (the agent) is supposed to act on behalf of another party (the principal), but may have different incentives or motives that can interfere with that goal. Externalities in consumption and perfect information are not directly related to these issues.

Moral Hazard and Adverse Selection Are Both Examples of