Adverse Selection

by Rudi Chen at Christina’s House

A talk that dissects adverse selection: situations where buyers have information that sellers do not have, or vice versa. With interactive activities and analysis, the speaker examines how information asymmetry affect car buying and health insurance. When insurance buyers have more information than insurance sellers: assume most life-insurance buyers have a high risk of death, the insurance company that charges an average price for life insurance will lose money.

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