Econ 3077 management of financil institution - Coursework Example

Topic: Econ 3077 management of financial Adverse selection and moral hazards The anxiety that rich people may have concerning other people marrying them merely for their money is a classic example of adverse selection since when an individual is rich, the people who will predominantly seek to get into marriage with him or her will be those interested in their wealth. Therefore, rich individuals may want to take extra care while screening the people who are interested in them in order to identify the ones who are genuinely interested from the ones who are interested in material benefit.

Typically, adverse selection takes place before the market occurs, but in this scenario, it occurs prior to the wedding taking place since it results from incomplete information concerning the aspects of a product to be purchased (Hansanti, Islam & Sheehan, 2008). If a person is not aware if his or her spouse is after them for their money or as a result of real love, them the individual will be more hesitant when it comes to marriage. This can be equated to paying relatively low amounts for vehicles that have been used in the situation where the buyer is not sure of their condition.

Additionally, rich people may not marry for any other reason apart from adverse selection. For example, if information concerning the spouse to be is imperfect to a level that it cannot be determined if they are after money or not, then the rich individual will behave in a suspicious manner that no one will wish to get married to him or her. financial institution companyNumber of companiesTotal assets (in millions)Percent (%)Insurance companiesLife insurance94100961714.6789Property and Casualty1964274116.

214163Pension Plans1350118978117.29832Depository InstitutionsBanks73384938455.9665Trust and Loan Companies70494950.719612Cooperative Associations83523265.122496Total6878014100ReferencesHansanti, S., Islam, S., & Sheehan, P. (2008). International finance in emerging markets. Heidelberg: Physica-Verlag.