Information asymmetry happens when buyers and sellers have different levels of information, leading to adverse selection in the market. Adverse selection occurs when one party, either the buyer or the seller, has hidden information about the product and makes buying or selling decisions based on that information. For example, in the used car market, buyers cannot know everything about the cars and cannot fully trust them. Because of this, they often try to buy used cars at lower prices to evaluate their quality. To make buyers feel more confident, sellers might promise to repair the car free of charge if it breaks within a year after purchase, protecting themselves against adverse selection. A successful transaction depends on strategies that align with the market’s specific characteristics. - Joseph’s “just my thoughts”
There’s a saying that after a flood, no water is left to drink. Those who see this as a metaphor grasp that it signifies that “usefulness” outweighs “quantity.” In contrast, literal interpreters might invest in stocks for “mineral water” due to an anticipated rise in demand for bottled water post-flood. This illustrates how interpretation and action can diverge significantly. - Joseph’s “just my thoughts”