The timeshare condominium in Florida bought by an individual last year ended up involving many extra costs and restrictions that were not apparent at the time of sale. This problem is a classic example of _____.

Question

The timeshare condominium in Florida bought by an individual last year ended up involving many extra costs and restrictions that were not apparent at the time of sale. This problem is a classic example of _____.​

Quizplus · Accepted Answer

The problem of extra costs and restrictions that were not apparent at the time of sale suggests that there were hidden characteristics involved in the transaction, which is a classic example of informational asymmetry. The buyer did not have all the relevant information before making the purchase, leading to an unfavorable outcome. This phenomenon is known as adverse selection or hidden characteristics. Therefore, option E is the correct choice. The other options are not applicable to this situation. The winner's curse occurs in auctions where the winner pays more than the item's worth. Moral hazard refers to the behavior of a party after a contract is agreed. Negative externalities involve the impact on third parties from economic activities. The principal-agent relationship involves how one person can act on behalf of another, often causing conflicts of interest.

The Timeshare Condominium in Florida Bought by an Individual Last