Common strategies used to address the problem of adverse selection include using a third party verifier, screening of buyers, and _____.
A)actuarial delimitation
B)signaling by sellers
C)physical localization
D)moral hazard planning

Question

Quizplus · Accepted Answer

Signaling by sellers is a common strategy to address the problem of adverse selection. It involves sellers providing information or signals about the quality of their product to potential buyers to reduce the information asymmetry and increase the likelihood of a mutually beneficial transaction. Hence, option B is the correct choice. The other options such as actuarial delimitation, physical localization, and moral hazard planning do not directly address the problem of adverse selection.

Common Strategies Used to Address the Problem of Adverse Selection