Talk:Adverse selection/Archives/2012

asymmetry of information and health
From Health insurance:
 * Some states require that insurance companies cover all who apply at the same cost

Here adverse selection occurs without asymmetry of information. So, is asymmetry of information really key to adverse selection? CyborgTosser 21:37, 12 Jun 2004 (UTC)

Discrepancy between this and The Market for Lemons
This article describes the good cars as being dubbed "cherries", while The Market for Lemons describes them as being dubbed "jewels". I suspect one is wrong. Anyone know which? &mdash;Morven 06:19, Jul 28, 2004 (UTC)

I'm pretty sure that "cherries" is the term that Akerlof used (I don't have the article here). Other sources refer to "peaches." By the way, the adverse-selection process is also sometimes refered to as "cream skimming." Jdevine 17:11, 28 Jul 2004 (UTC)

Definition of adverse selection is overly broad: it does not include moral hazard
The definition is wrong. Adverse selection refers to assymetric information prior or to or during the negotiation of the deal, whereas moral hazard refers to assymetric information during performance of the resulting contract. An example of moral hazard is that people are are more likely to behave recklessly if insured. An example of adverse selection is that people who are high risk are more likely to buy insurance. They are quite distinct concepts. They are both examples of assymetric information which I've created a new stub for. Economo 05:06, 18 August 2006 (UTC)

"(Whatever)"
Under the "Example:Insurance" sub-heading, is there some reason for the "(Whatever)", or is this a mischievous bit of editing? Sharodes 17:05, 27 August 2007 (UTC)

Smoker / non-smoker example
Smokers have a higher expected medical costs so they would be willing to spend more on insurance than non-smokers. In each 'round' the premium should move away from the general population actuarially fair cost because the increased premiums become too much for the non-smoker. However, why would the premiums ever become greater than the smoker actuarially fair cost? So in the end only smokers would chose to purchase insurance, but some people would still get insurance. —Preceding unsigned comment added by 68.231.165.44 (talk) 18:47, 22 March 2008 (UTC)

Too much jargon
There is a temptation to obscure meaning with random use of jargon. For instance, the use of the term "assymetric information" may make what is being said appear deeper, but it isn't helpful unless it is accompanied by a plain English explanation ( which in this case is simple enough ). Sure, the reader can follow the link and look the term up but that complicates the process. Let's keep the clear explanation in one place and only include the jargon and links as extras. —Preceding unsigned comment added by 81.187.233.172 (talk) 14:36, 18 September 2008 (UTC)

Market for lemons section - deleted?
Was there a good reason for it? http://en.wikipedia.org/w/index.php?title=Adverse_selection&diff=192471366&oldid=192355511 —Preceding unsigned comment added by 195.98.165.2 (talk) 17:49, 2 November 2008 (UTC)

Suggest delete Asymmetric information and Stock Market sections
There is a separate page on asymmetric information.

The stock market example 'stretches' the concept of adverse selection to situations where it isn't commonly applied. Generally, adverse selection refers to situations where a group of customers or counterparties with 'bad' characteristics self-selects, leading to a 'bad' price, leading to the marginal members of the group withdrawing, leading to a worse price, etc. So the adverse selection concept usually includes the 'bad' characteristics of the self-selecting group, and the worsening characteristics of the group over time, i.e. the dynamics. (This is described in the smoker / non-smoker example in the article, and the paragraph immediately following it.)

The stock market examples (e.g. insider trading) are more focused on different information of just two parties, the buyer and the seller, without a self-selecting group, and without the group dynamics. They are good examples of asymmetric information, but not very good examples of adverse selection.

To support the above comments, look at Google results: "adverse selection in the stock market" returns 3 pages, all of them derived from this Wikipedia article

But "adverse selection in insurance" returns over 5,000 pages.

So I suggest deleting the above sections. Any comments?

Lindsway (talk) 13:26, 14 December 2008 (UTC)


 * I think it's possible there's worthwhile ideas on adverse selection with stock trading, but that section was describing something else, so yes, it should go. The asymmetric information section was appropriate, but now everything that was there is in the bigger section with better refs. (Nice job!) C RETOG 8(t/c) 17:50, 14 December 2008 (UTC)