ASSIGNMENT 6

Question/Exercise

Directions: Answer briefly with a maximum of 100 words only. Please avoid PLAGIARISM.
(30pts)

1. You sell bicycle theft insurance. If bicycle owners do not know whether they are high- or
low- risk consumers, is there an adverse selection?

In my own opinion, being not aware whether they high- or low-risk consumers
will not result to an adverse selection as it only concerns one party lacking information
on which the seller knows about the product. I think this will be resolved easily as it
could be discussed in a good manner and be explained properly to the clients in order to
avoid confusion and to educate them more about what kind of transaction they are going
into.