Explain two types of commitments in repeated adverse selection

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Explain two types of commitments in repeated adverse selection

business economics

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Answer 1

Answer #1

In adverse selection theory there are following two types of commitments :

Full Commitment where repeated problem is static problem and contracts are complete. Government in this case can renegotiate contracts further.
No commitment where contracts are incomplete and government cannot bind further contracts.

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Explain two types of commitments in repeated adverse selection

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FINANCE ECONOMICS 5. (8 points) Define Adverse Selection. Explain why adverse selection can be problematic in...

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Explain two types of commitments in repeated adverse selection

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