The Problem of Asymmetric Information – Discussion
Question Description
Thereis frequent confusion about the terms asymmetric information, moralhazard and adverse selection? Asymmetric information is the cause,moral hazard and adverse selection are the outcome. This video is greatat explaining the connection between asymmetric information and adverseselection. https://www.youtube.com/watch?v=sXPXpJ5vMnU Your job will be to explain what is the adverse selection problem faced by the labor market for police officers.
Manypolice officer positions require the applicant to have a college degreeeven though the tasks of a police officer rarely call upon collegecourse material. Why don’t police departments increase their applicantpool by dropping this requirement? What problem is faced by each party inthe process of hiring police officers? As you answer this questionthink back to last week and the problem of Type 1 and 2 errors and thehuman tendency to be risk-averse.
PLEASE DO NOT RELY ON WIKIPEDIA, INVESTOPEDIA OR ANY OTHER PEDIA AS A REFERENCE AT ANYTIME IN THIS COURSE.
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