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    Question

    Which of the following situation occurs when one party in a negotiation has relevant information the other party lacks.

    A Adverse selection Correct Answer Incorrect Answer
    B Reverse selection Correct Answer Incorrect Answer
    C Multilateral Selection Correct Answer Incorrect Answer
    D Goods Selection Correct Answer Incorrect Answer
    E Repeated Selection Correct Answer Incorrect Answer

    Solution

    Adverse selection occurs when one party in a negotiation has relevant information the other party lacks. The asymmetry of information often leads to making bad decisions, such as doing more business with less profitable or riskier market segments.

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