adverse selection

adverse selection definition - business

adverse selection

  1. The likelihood that goods and services of inferior quality will dominate a market in which buyers have difficulty judging quality. Thus, consumers are likely to make an adverse selection and choose goods and services of poor quality.
  2. The predisposition of people most likely to file an insurance claim to purchase insurance coverage. For example, people in poor health are most likely to buy health insurance. See also moral hazard.

The American Heritage® Dictionary of Business Terms Copyright © 2009 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

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