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adverse selection

Economics 101: Market Failure (PPIP edition)

March 25, 2009

Back in Ec 10 we discussed the two principal forms of market failure: moral hazard and adverse selection. Both are forms of information asymmetries, and lead to a loss of surplus and general lack of efficient resource allocation. Moral hazard is the idea that if someone knows they are protected from risk, they will behave in […]

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