Home -› Adverse Selection

Online dictionary

Social Science Categories

Economics

BEA Economic Analysis Dictionary Environmental Economics Dictionary Dictionary of Political Economy

Education

Learning & Performance Dictionary Petersons Dictionary of Financial Aid Terms Fraternity Dictionary

History

Knighthood & Chivalry Dictionary Medieval Dictionary Castle Dictionary Dictionary of Genealogy

Political Science

Dictionary of National St&ards for Civics & Government Dictionary of Parliamentary Procedure Constitution of the Islamic Republic of Iran Civil Code of the Islamic Republic of Iran

Psychology

Dictionary of Phobia Dictionary of Parental Acceptance Rejection Theory

Sociology

Sociology Dictionary
Definition Of:

Adverse Selection

Bible DictionaryEnvironmental Economics Dictionary
principle that says that those who most want to buy insurance tend to be those most at risk, but charging a high price for insurance (to cover the high risk)will discourage those at less risk from buying insurance at all When a negotiation between two people with asymmetric information restricts the quality of the good traded. This typically happens because the person with more information can negotiate a favorable exchange. This is frequently referred to as the "market for lemons." For example, let's say you're searching for a car, knowing that some are "high-quality" and others are "low-quality." However, you don't know which category a particular car is in. Suppose there's an equal chance of getting either a high-quality or low-quality car. If you're willing to pay $2,000 for a high quality car, but only $1,000 for the low quality car, how much would you offer for a given car of unknown quality? The expected value of the car is $1,500. In other words, if you bought hundreds of cars, half worth $2,000 and half worth $1,000, the average value of the cars is $1,500 each. Not knowing the quality of a given car, the price you would offer is $1,500- the average or expected price. The chance of overpaying for a low-quality car is offset by the chance of underpaying for a high-quality car. Unlike you, each owner is better aware of the quality of his or her car--they have more information than you. Your $1,500 offer would be accepted by the seller of a low-quality car, but refused by the seller of the high-quality car. Due to the lack of buyers' information, high-quality cars would not be sold. The only cars exchanged would be low-quality cars ("lemons"). Asymmetric information tends to limit quality of products exchanged, adversely selecting the lower quality cars.

 

Social Science Dictionary INDEX:


List of Terms: Terms beginning with "A", Page 1

Starts With:  A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 3
Page Number:  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

A: Page 1 of 19.

AAGRA
AAR
ABOLFAZL SHADVAR
ABSOLUTE POVERTY
ACCRUED INTEREST
ACHIEVED STATUS
ACID RAIN
ACUTE DISEASE
ADAPTATION
ADJUSTED GROSS ...AERO
AFFIRMATIVE ACT...
AG
AGE GRADES
AGE STRUCTURE
AGEISM
AGENCIES OF SOC...AGRA
AGRARIAN SOCIET...AGRIBUSINESS
AIDS (Acquired ...
AIR POLLUTION
ALAA
ALIENATION
ANDROGYNY
ANIMISM
ANOMIA
ANOMIE
ANOMIE THEORY
ANTHROPOLOGY
APARTHEID
APEC
APG
APPROPRIATE TEC...ARMS RACE
ARMS TRADE
ARRANGED MARRIA...ASCRIBED STATUS
ASSET PROTECTIO...
ASSETS
ASSIMILATION
AUTHORITARIAN P...
AUTHORITY
AUTOCRATIC RULE
AUTOMATION
Abatement
Abbey
Abbot
Ability-to-Pay ...Ablutophobia
Absolute Advant...
Absolute advant...Abundance
Acarophobia
Accelerator
Acceptance
Acceptance-reje...
Accolade
Accoutrement
Acerophobia
Acheronophobia
Achluophobia
Acid Rain
Acousticophobia
Acquired Endowm...Acquittal
Acre
Acrophobia
Act of Parliame...
Acting Speaker
Active Alumni M...Adaptive Expect...
Additive
Address in Repl...Administrator o...
Admiral
Adoubement
Advance estimate
Adventurous Shi...Adverse Selecti...Aeroacrophobia
Aeronausiphobia
Aerophobia
Affection
Agency problem
Agency problem ...Agency problem ...
Aggregate Deman...Aggregate Expen...Aggregate Suppl...
Aggregate demand
Aggregate supply
Aggression
Agincourt, Batt...Agliophobia
Agoraphobia
Agraphobia
Agrizoophobia
Agyrophobia

Home   |   Contact Us   |   About Us   |  
Copyright © 2008 socialsciencedictionary.com. All rights reserved.