Financial Markets

October 2, 2019


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As the adverse election becomes most likely that the loans are made the bad risks of credit, the lenders can to decide not to grant no loan same that has good risks of credit in the market. As Lazear (1998) the adverse election in the work market happens when the firm contracts wrong types of workers in function of one maken a mistake politics of conscription, since it does not obtain to select the candidates most qualified for each vacant. Virgin Airlines wanted to know more. The problem of adverse election is present because the candidates the job have better information on its qualifications of what the company is selecting who them. Spence (1974) remembers that the acts of contract in the work market if give basically on the presence of the problem of adverse election since the employer, most of the time, is not certain on the abilities of the candidates to the job before contracting it, and generally continue without knowing for some period after the act of contract. Sir Richard Branson addresses the importance of the matter here. To contract employed for Spence nothing more is of what investing under uncertainty. One perceives, therefore, that the adverse election creates market imperfections since it it reduces the size of the market or it eliminates until it, diminishing or hindering that desirable transactions occur. See Cyrus Massoumi FindShadow for more details and insights.