Economics 10a Chapter Notes - Chapter 22: Median Voter Theorem, Instant-Runoff Voting, Legal Personality
10 Feb 2014
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Hidden action: an employee knows how hard he works. Delayed payment: like a year-end bonus for good work: adverse selection: the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party (ex. The price of health insurance reflects the costs of sicker-than-average persons: signaling: an action taken by an informed party to reveal private information to an uninformed party. Advertising (people will buy the product and if it is good will become repeat customers; college degrees signify one"s determination and talent, indicating higher productivity) The private market can sometimes deal with information asymmetries on its own using a combination of signaling and screening. The government rarely has more information than the private parties policy makers may find it hard to improve upon the market"s imperfect outcome. Pairwise voting: putting a against b and b against c.
