Section 2 (Part 4) - Element 1: Adverse selection (Reflection question)
Adverse Selection:
• Pre-contract, information gap
• May be asymmetric (one party) or symmetric (all parties)
• Information gap may result in failure to close deal due misalignment of parties’ assessment or expectations
Reflection questions for adverse selection (Choose 1):
(1) AirBnb, the business that provides a platform for property owners to rent out a room or their entire property, has a significant adverse selection issue. What may that be? How does AirBnb deal with such an adverse selection problem?
(2) Identify an adverse selection issue in a transaction that you have advised in your practice and describe the contract design responses that you have seen.
Please post your reflection answer onto our discussion board below.
Continue with our mini lecture in the next online session.
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