Consider the Fact That 81 Percent of Surveyed New Business

question 62

Essay

Consider the fact that 81 percent of surveyed new business owners thought their business had at least a 70 percent chance of success,but only 39 percent thought that most businesses like theirs would succeed.Describe the bias this example illustrates.

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Definitions:

Insurance Monies

Funds paid out by insurance companies to policyholders in the event of a claim for loss or damage covered by a policy.

Adverse Selection

A situation in markets where buyers or sellers have information that other participants do not have, leading to an inefficient transaction outcome.

Asymmetric Information

A situation in which one party in a transaction has more or superior information compared to another.

Lemons

In economics, refers to a lower-quality product that is difficult to distinguish from higher-quality products before purchase, notably used in a market context where there is information asymmetry between buyers and sellers.