Adverse selection is the process of making a decision without having all of the knowledge needed. It is a term commonly used in the insurance industry, when applicants withhold information from an ...

Discover strategies to overcome asymmetric information in markets, including warranties, regulations, and monitoring, for more efficient transactions.

In an extreme case, the poor risks will be the only purchasers of coverage, and the insurer can expect to lose money on each policy sold. This situation, referred to as adverse selection, occurs when ...