Common Strategies to Deal with the Problem of Adverse Selection

question 8

True/False

Common strategies to deal with the problem of adverse selection include screening (which involves using observable information to make inferences about private information), signaling (by engaging in actions that reveal one's private information), and establishing a good reputation.False

---

Definitions:

Focus Group

Research method that involves a collective depth interview.

ELM (Elaboration Likelihood Model)

A theory explaining how people are persuaded, suggesting that the level of thought given to persuasive communications depends on the relevance of the message to the individual.

Central Route

A term from the Elaboration Likelihood Model of persuasion that describes a cognitive processing path where individuals are persuaded by the content of the message itself, through thoughtful and critical analysis of its arguments.

Mental Shortcuts

Cognitive strategies, also known as heuristics, used by individuals to simplify decision making by reducing complex problem solving.