6. Choices made in the presence of imperfect information may not be efficient. Problems are particularly important when information is asymmetric. Asymmetric information occurs when one of the parties to a transaction has information relevant to the transaction that the other party does not have. Under these conditions, we may have adverse selection. Opportunistic behavior on the part of the better informed buyer or seller prevents some welfare-enhancing transactions from occurring. Moral hazard arises when one party to a contract changes behavior in response to incentives in the contract so as to pass some of the cost of his or her behavior on to the other party. Under these conditions, it will also be difficult to write some welfare-enhancing contracts.