Discuss the prevalence of asymmetric information in insurance contracts, in lending, in investment. Discuss adverse selection. Any examples.

Discuss moral hazard, Any examples?

How are the two different?

When you apply at a financial institution for a loan, You asked to fill out extensive loan applications, provide detailed financial information, provide loan collateral, etc.

In addition, you may find that the money is dispensed to you as you meet certain performance criteria (for example, as in a construction loan).

Discuss how the loan approval and distribution process reduces risks to the financial institution associated with both adverse selection and moral hazard.

Reference:

Review Kanopy videos on adverse selection and moral hazard.

Advarse selection a primer. (August 14, 2017). Money and banking.com Retrieved from https://www.moneyandbanking.com/commentary/2017/8/13/adverse-selection-a-primer

(video) Moral Hazard: whom do you trust.