A difference between moral hazard and adverse selection is that

A) moral hazard deals with pre-contractually determined public information
B) moral hazard deals with post-contractually determined private information
C) adverse selection deals with pre-contractually determined private information
D) adverse selection deals with post-contractually determined public information

Question

​A difference between moral hazard and adverse selection is thatA) ​moral hazard deals with pre-contractually determined public informationB) moral hazard deals with post-contractually determined private informationC) adverse selection deals with pre-contractually determined private informationD) ​adverse selection deals with post-contractually determined public information

Dominous Ominous · Accepted Answer

Final Answer : B, Explanation :  Moral hazard involves changes in behavior after a contract is made, based on private information, while adverse selection involves private information known before a contract is made.

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