Adverse selection意思

"Adverse selection" is a term used in economics and finance, particularly in the context of insurance and financial markets. It refers to a situation where the quality of goods or the type of individuals participating in a market is not uniform, and the participants with the highest risk or the worst quality are the ones most likely to participate. This situation can lead to market failure because the market does not reflect the true average quality or risk of the goods or individuals involved.

In the context of insurance, adverse selection occurs when the individuals with the highest risk of incurring losses are the ones most likely to purchase insurance. For example, someone who knows they have a genetic predisposition to a certain disease is more likely to buy health insurance than someone who does not have such a predisposition. This can lead to insurance companies charging higher premiums to cover the higher risk, which can make insurance less attractive to those who are less risky, leading to a further skewing of the risk profile of those holding insurance.

In financial markets, adverse selection can occur when investors with the least valuable assets are the ones most likely to sell them, while those with the most valuable assets hold onto them. This can lead to a market where the average quality of assets is lower than what is perceived, which can lead to market inefficiencies.

Adverse selection is a problem because it can lead to markets that do not reflect the true value or risk of the goods or individuals involved, which can lead to market failure and suboptimal outcomes for the participants. To mitigate adverse selection, markets often use mechanisms such as insurance underwriting, where insurance companies assess the risk of potential policyholders before offering insurance, and disclosure requirements, where sellers of financial assets are required to provide information about the assets they are selling.