Adverse selection Flashcards
1
Q
What does it mean if product quality is exogenous?
A
The quality of the good is decided outside the model
2
Q
Under full information, what can we assume about a good?
A
We can assume the good is a search good
3
Q
What is an experience good?
A
Consumers can only evaluate utility post-consumption
4
Q
Under what condition will the consumer buy?
A
If the expected utility from purchasing is larger than the price
5
Q
What is a key example of adverse selection? Who is at a disadvantage here?
A
- Insurance
- The seller is at a disadvantage
