EconExperiments
- Asymmetric Information
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Asymmetric information | ||
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Adverse selection | ||
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Moral hazard | ||
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Market failure | ||
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Students are divided into 2 groups. 1 group as car sellers, who know whether their cars are good cars or lemons. 1 group as car buyers who do not know the condition of the car they are going to buy. They are allowed to trade in the market. This experiment illustrates how information asymmetries can lead to adverse selection. | ||
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