Consider the following story: diversifun, inc., an insurance company, recently decided to offer boat insurance. diversifun was concerned that the most likely boat insurance customers would be the least competent, highest-risk boat captains, because they stand to benefit most from boat insurance coverage. since diversifun cannot distinguish perfectly between high-risk and low-risk skippers, it decided to set its boat-insurance premiums a bit higher to account for the foolhardy sea captains. the economic problem in this story is known ) adverse selectionb) signalingc) moral hazardd) screening
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Consider the following story: diversifun, inc., an insurance company, recently decided to offer boat...
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