Tag

adverse_selection

2 cards

Finance & microfinanceExpert Theory
Asymmetric Information Separating Equilibrium Failure
Microfinance institutions must charge an interest rate of 38% APR (compared to a baseline 17.5% APR) to break even under adverse selection; if moral hazard elasticity exceeds 0.46, no zero-profit separating equilibrium exists at any interest rate.
DevelopmentExpert Theory
Exogenous Indexing for Moral Hazard Elimination
Linking payouts strictly to third-party automated rain gauges eliminated individual claims verification costs and completely removed moral hazard and adverse selection incentives.