Question
3) For each of the following scenarios, let me know a) whether the information asymmetry occurs before or after a transaction or event, and b)
3) For each of the following scenarios, let me know a) whether the information asymmetry occurs before or after a transaction or event, and b) give me the correct term for the scenario(s) (moral hazard, adverse selection, risk aversion, screening, signaling, Principal-Agent problem, Lemons problem, or any combination of these). Tell me why you think so.
Individuals with homeowner's insurance tend to be more forgetful about locking their possessions safely before heading out.
You offer an extended warranty for your product that is purchased by a few customers. If the product typically fails 2% of the time, the claim rate will exceed 2% of warranty purchasers.
A firm deciding to hire a secretary bases its decision on how well the candidate is trained on certain software
The "lemons" problem in hiring college professors
Healthcare-insured employees forgoing their diet and exercise routines
Leaving a handsome tip for the waiter in full view of your dinner date.
Prospective secretaries must take a typing test before being hired
A firm hiring only MBAs regardless of the self-professed skill set is an example of
The reason most people buy insurance
An action by an "informed party" meant to reveal her true risks or type
You only go swimming when the lifeguard is on duty
People drive less carefully in icy conditions with anti-lock brakes than without
Smokers get the worse life insurance rates as non-smokers
Dr. Babin wears a tie to his meeting with the Dean.
A manufacturer requires suppliers to be ISO 9000 certified
An individual decision maker values a lottery at less than its expected value
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