adverse selection
noun1
Business, Economics, Insurance, Sciences The process by which the price and quantity of goods or services in a given market is altered due to one party having information that the other party cannot have at reasonable cost.
- It is adverse selection that leads US workers who anticipate high family medical expenditure to seek employers with superior health insurance coverage for their employees.
- The large number of "lemons" in the used-car market is the result of adverse selection.
- Related terms
- lemon, moral hazard, self-selection