Recognizing the existence of asymmetric information
complete the following table by determining which economic problem is characterized in each of the scenarios provided.
scenario
adverse selection | moral hazard for each
(a) when ginny didn't have renter's insurance, she was very careful not to leave candles lit in her apartment and locked the door when she left. now that she has renter's insurance, she typically leaves candles burning all day and forgets to lock the door because she knows that, even if her apartment catches on fire or gets broken into, her insurance will cover it.
(b) kenji would like to buy a used plasma television, but he is not an electronics expert and, thus, cannot assess the quality of a tv directly before owning it. kenji believes that owners of the worst tvs are more willing to sell their tvs than owners of the best tvs. because of this, kenji believes that used tvs up for sale are probably of low quality.