Chapter 29 - Imperfect Information: Adverse Selection and Moral Hazard

asymmetric information

The ________ in the market generates a downward spiral of price and quality:

Any company

________ receiving a score of at least 85 out of 100 has the right to display a Customer- Rated Gold seal for a 1- year period.

ValueStar

________ is a consumer guide and a business directory that uses customer satisfaction surveys to determine how well a firm does relative to its competitors in providing quality service.

Deductibles

________ reduce the moral- hazard problem because they shift to the policyholder part of the cost of a claim on the policy.

lemons model

The ________ makes two predictions about markets with asymmetric information.

Insurance companies

________ use various measures to decrease the moral- hazard problem.

asymmetric situation

A(n) ________ is a situation in which one side of the market- either buyers or sellers- has better information than the other.

adverse selection problem

A(n) ________ is a situation in which the uniformed side of the market must choose from an undesirable or adverse selection of goods.

demand curve

The ________ for high- cost people is higher than the curve for low- cost people, reflecting their larger benefits from having medical insurance.

Consumer expectations

________ play a key role in determining the market outcome when there is imperfect information.

low repair

A high- quality car, also known as a "plum, "is reliable and has relatively ________ costs.

money-back-guarantee

The ____________ is where a seller could promise to refund the $4,000 price if the car turns out to be a lemon.

warranties and repair

The _____________ guarantees are where the seller could promise to cover any extraordinary repair costs for 1 year.

reservation price

A ______________ is a price at which a consumer is indifferent about the additional search for a lower price.