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Adverse Selection in Home Buying

by Jadrian

Phil is desperate to sell this house. The buyer loves it but is afraid that it is haunted. Phil brings in Gloria to cleanse the house of unfriendly spirits. What they find isn't spirits - it's not ghost. It's only bees! This demonstrates adverse selection and screening. Economics suggests that a market where the buyers know less than the sellers will result in adverse selection. That is, there will be more "bads" (haunted) houses on the market than "goods" (non-haunted). One way the ways that the problem of adverse selection can be reduced is through signaling. Phil (the seller) takes an action (asks Gloria to inspect the home) in order to reveal that this home is a "good" (not haunted) home.

Modern Family: It's Only Bees!

Jay and Gloria try to cleanse a house

from Modern Family (2016)
Creator: Chris Lloyd and Steven Levitan
Distributor: Google Play Store
Posted by Jadrian
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