Hubbard O'Brian Microeconomics Ch 7 Key Terms

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4 Terms

1
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Adverse selection

The situation in
which one party to a transaction takes
advantage of knowing more than the
other party to the transaction.

2
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Asymmetric information

A
situation in which one party to
an economic transaction has less
information than the other party.

3
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Moral hazard

Actions people
take after they have entered into a
transaction that make the other party
to the transaction worse off.

4
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Principal-agent problem

A
problem caused by an agent pursuing
the agent's own interests rather than
the interests of the principal who
hired the agent.