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Adverse selection models with private values can also be further categorized by distinguishing between models with one-sided private information and two-sided private information. The most prominent result in the latter case is the Myerson-Satterthwaite theorem . [ 27 ]
In life insurance, adverse selection describes the occurrence of individuals with a high-risk profession, hobby or health condition applying for life insurance more often than low-risk individuals ...
In the instance of contract theory [42] (which encompasses agency theory), in the adverse selection model the agent holds private information before the contract is created with the principal, whereas in the moral hazard model the agent is informed of the withheld information privately after the contract is created with the principal.
A similar concept is moral hazard, which differs from adverse selection at the timing level. While adverse selection affects parties before the interaction, moral hazard affects parties after the interaction. Regulatory instruments such as mandatory information disclosure can also reduce information asymmetry. [28]
In contract theory, the terms "screening models" and "adverse selection models" are often used interchangeably. [13] An agent has private information about his type (e.g., his costs or his valuation of a good) before the principal makes a contract offer. The principal will then offer a menu of contracts in order to separate the different types ...
“Although research on the health effects of a Carnivore diet is lacking, we do know that a diet that only includes animal products (mainly meats, eggs, and low carbohydrate dairy products like ...
Death spiral is a condition where the structure of insurance plans leads to premiums rapidly increasing as a result of changes in the covered population. It is the result of adverse selection in insurance policies in which lower risk policy holders choose to change policies or be uninsured.
The two vice presidential nominees, Minnesota Gov. Tim Walz and Ohio Sen. JD Vance, faced off tonight on a debate stage in New York City with just over a month until the Nov. 5 election. The USA ...