Demonstrate the market for insurance models problem of adverse selection, explain the moral hazard & Discuss examples of moral hazard. Explain the principal-agent relationship between firms and employees. Describe how best to control incentive conflict within a firm. Discussing incentive conflicts between divisions of a firm.

• Describe an adverse selection problem a company is facing. What is the source of the asymmetric information? Who is the less informed party? What transactions are not being consummated as a result of the information? Could you (or do you) use signaling or screening to consummate these transactions? Offer your company some sound advice, complete with computations of the attendant profit consequences.
• Describe a decision that is centralized (or decentralized) in your company. How could you decentralize (or centralize) the decision? What would happen if it were decentralized (or centralized)? Compute the profit consequences of the change.

Including references