(Solved):What is the difference between adverse selection and moral hazards? Use detailed examples to explain what the two concepts imply. In the context of your examples, discuss how the problems associa… View Answer…

 

Question

What is the difference between adverse selection and moral hazards?

Use detailed examples to explain what the two concepts imply.

In the context of your examples, discuss how the problems associated with moral hazards and adverse selection can be resolved.

 

EXPERT ANSWER

Moral hazard is when one party in a transaction either lies/misleads the other or changes their behavior following the transaction. Adverse selection on the other hand is when one party simply has

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