When a firm promises more than it can actually deliver to win a contract, this is known as?
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When a firm promises more than it can actually deliver to win a contract, this is known as 'adverse selection'.
Adverse Selection
- In economics, adverse selection means when the buyer and the seller have different levels of information about a particular situation.
- In such a case, participants with information might take part selectively in trade operations at the risk of other parties who don't have access to the same information.
The concept of adverse selection is more prevalent in the Insurance Industries.
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