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7 Cards in this Set
- Front
- Back
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Adverse selection
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Opportunism characterized by an informal person benefiting from trading with a less informed person who does not know about an unobserved characteristic of the informed person (e.g. health)
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Moral hazard
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Opportunism characterized by an informed person taking advantage of a less informed person through an unobserved action (e.g. worker’s effort)
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Ex-ante moral hazard
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Problem related to unobservable actions/efforts undertaken by agent before “returns” are realized.e.g. financial firms taking risky investments, assuming that the state will bail them out if things go wrong
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Ex-post moral hazard
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Problem related to unobservable actions/effort undertaken by agent after project returns are realized e.g. false claim
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Asymmetric information
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Asymmetric information about quality can drive high quality goods out of the market
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Screening
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Action taken by an uninformed person to determine information possessed by informed people
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Signalling
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Action taken by informed person to send information to a less-informed person
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