Adverse selection
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Adverse selection is the problem that arises when one party knows more about the quality of the good than the other, and as a result, the party with less knowledge must worry about ending up at a disadvantage.
Definition
According to Principles of Economics by Timothy Taylor (3rd edition),
- Adverse selection. The problem that arises when one party knows more about the quality of the good than the other, and as a result, the party with less knowledge must worry about ending up at a disadvantage.
