(Solved):How might warranties and guarantees address the economic information problem of efficient risk sharing caused by moral hazard and adverse selection? View Answer…

 

Question

How might warranties and guarantees address the economic information problem of efficient risk sharing caused by moral hazard and adverse selection?

 

EXPERT ANSWER

While selling and purchasing goods and services in the market, there is lots of misinformation/lack of information exists in the market. This brings a doubt in the minds of consumers and consumer starts avoiding that product because of high risk caused by moral hazard and adverse selection. Warranties and

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