-When consumers have perfect information about the quality of the products they purchase, the problem of adverse selection is likely to arise.

Question

Quizplus · Accepted Answer

Adverse selection arises when there is asymmetric information between buyers and sellers, meaning one party has more or better information than the other. When consumers have perfect information about product quality, this asymmetry is eliminated, reducing the risk of adverse selection.

-When Consumers Have Perfect Information About the Quality of the Products