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Bridging the gap between elementary and advanced approaches to teaching adverse selection

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  • Rigall-I-Torrent, Ricard

Abstract

The paper proposes a framework for teaching adverse selection based on simple graphical and numerical arguments. This framework goes beyond the typical case of discrete quality levels currently found in intermediate microeconomics books and allows for a (more realistic) continuum of quality levels without the resort to integral calculus. This proposed approach is useful for putting the emphasis on the beliefs of individuals about the behaviour of others and for considering thin markets and market vanishing as outcomes of dynamic processes.

Suggested Citation

  • Rigall-I-Torrent, Ricard, 2013. "Bridging the gap between elementary and advanced approaches to teaching adverse selection," International Review of Economics Education, Elsevier, vol. 12(C), pages 12-19.
  • Handle: RePEc:eee:ireced:v:12:y:2013:i:c:p:12-19
    DOI: 10.1016/j.iree.2013.04.002
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    More about this item

    Keywords

    Belief; Thin market; Market vanishing; Asymmetric information; Adverse selection;
    All these keywords.

    JEL classification:

    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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