Adverse Selection Model in E-Commerce

Adverse selection means the selection by the consumer when faced with the circumstance of asymmetric information. Adverse selection model was suggested by the American economist George Akerlof (1970), who is one of Nobel Economics Prize laureates in 2001. With this model, Akerlof indeed explains many economic institutions and many important aspects of uncertainty. But the model studies the traditional markets (tangible markets), how about the e-commerce that are based on the Internet? Based on Akerlof model, this paper builds up the adverse selection model in the e-commerce markets, and probes into resolving approaches about the adverse selection in e-commerce.