Part 1Which of the following explains why dating can be considered a method to solve the adverse selection problem? A. Couples are able to extract information about their significant other and make better decisions about a probable future together. B. Couples share selective information about themselves, thus increasing asymmetric information and reducing the adverse selection problem. C. While dating, couples often make commitments to each other which reduces moral hazard in the short term and the adverse selection problem in the long run.

Question

Part 1Which of the following explains why dating can be considered a method to solve the adverse selection​ problem? A. Couples are able to extract information about their significant other and make better decisions about a probable future together. B. Couples share selective information about​ themselves, thus increasing asymmetric information and reducing the adverse selection problem. C. While​ dating, couples often make commitments to each other which reduces moral hazard in the short term and the adverse selection problem in the long run.

BlackTom AI · Accepted Answer

Let’s break down the options in terms of how dating relates to adverse selection in a market for dating partners.
Option A: 'Couples are able to extract information about their significant other and make better decisions about a probable future together.' This aligns with adverse selection theory: dating allows individuals to reveal private information over time, reducing information asymmetry, so partners can better assess compatibility and future outcomes. The idea is that through dating, people learn about preferences, reliability, and traits that matter for a long-term match, which helps them avoid pairing with someone who would be a poor fit once hidden attributes come to light.
Option B: 'Couples share selective information about themselves, thus increasing asymmetric information and reducing the adverse selection problem.' Here the claim that sharing selective information increases asymmetry is inconsistent. If information sharing reduces asymmetry, it should help alleviate adverse selection, not worsen it. The statement incorrectly implies that partial or selective disclosure worsens what dating is supposed to fix, which contradicts the standard mechanism of reducing information gaps through disclosure.
Option C: 'While dating, couples often make commitments to each other which reduces moral hazard in the short term and the adverse selection problem in the long run.' This mixes several ideas. While commitments can influence behavior and reduce certain moral hazard concerns, the claim that dating commitments simultaneously solve adverse selection in the long run overstates the effect. Adverse selection is about hidden information prior to agreement; commitments after dating may help coordinate incentives, but they do not inherently eliminate adverse selection in the long run, and the linkage described is not a standard, clean explanation of the adverse selection mechanism.
In summary, Option A correctly describes how dating can function as a mechanism to learn about a potential partner, thereby mitigating information asymmetry and improving decision-making about a future together. Options B and C either misstate the relationship between information sharing and asymmetry or conflate related but distinct concepts (moral hazard versus adverse selection) in a way that does not coherently explain the adverse selection problem within dating.

Quiz:Quiz 2

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