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precise methods of dealing with uncertainty? When are these useful?
Discussion Question 15: How does the adverse selection problem arise in the credit-card market? How do creditcard companies reduce the adverse selection problem that they face? To what complaint does this give rise?
Spreadsheet Problem 1: An individual has to choose between investment A and investment B. The individual estimates that the income and probability of the income from each investment are as given in the following table.
Investment A Investment B Income Probability Income Probability 4,000 0.2 4,000 0.3 5,000
precise methods of dealing with uncertainty? When are these useful?
Discussion Question 15: How does the adverse selection problem arise in the credit-card market? How do creditcard companies reduce the adverse selection problem that they face? To what complaint does this give rise?
Spreadsheet Problem 1: An individual has to choose between investment A and investment B. The individual estimates that the income and probability of the income from each investment are as given in the following table.
Investment A Investment B Income Probability Income Probability 4,000 0.2 4,000 0.3 5,000