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Adverse Selection

The New Palgrave Dictionary of Economics

Abstract

Consider a market in which products of varying quality are exchanged. Both buyers and sellers rank products of different quality in the same way, but only the sellers can observe the quality of each unit of the good they sell. Buyers can observe at most the distribution of the quality of the goods previously sold. Without some device for the buyers to identify good products, bad products will always be sold with the good products. Such a market illustrates the problem of adverse selection.

This chapter was originally published in The New Palgrave: A Dictionary of Economics, 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman

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References

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Author information

Authors and Affiliations

  1. http://link.springer.com/referencework/10.1007/978-1-349-95121-5

    Charles Wilson

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  1. Charles Wilson
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Editor information

Editors and Affiliations

  1. Department of Economics, University of Wisconsin Department of Economics, Madison, USA

    Steven Durlauf

  2. Cornell University , ITHACA, New York, USA

    Lawrence E. Blume

Copyright information

© 1987 The Author(s)

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Wilson, C. (1987). Adverse Selection. In: Durlauf, S., Blume, L. (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_104-1

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  • DOI: https://doi.org/10.1057/978-1-349-95121-5_104-1

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  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-95121-5

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

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Chapter history

  1. Latest

    Adverse Selection
    Published:
    12 April 2017

    DOI: https://doi.org/10.1057/978-1-349-95121-5_104-2

  2. Original

    Adverse Selection
    Published:
    11 October 2016

    DOI: https://doi.org/10.1057/978-1-349-95121-5_104-1

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