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adverse selection vs. incentive problem

2. John owns one of many franchise ice cream stores located across the country. John doesn't like to work evenings and hires Marcy to work the store in the evening for $7.50 per hour. Marcy's friends come by each evening to visit with her and she gives them free cones. Is this an adverse selection problem or an incentive problem? Explain your rationale. What is the solution?

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2. John owns one of many franchise ice cream stores located across the country. John doesn't like to work evenings and hires Marcy to work the store in the evening for $7.50 per hour. Marcy's friends come by each evening to visit with her and she gives them free cones. Is this an adverse selection problem or an incentive ...

Solution Summary

How to determine whether an issue is an adverse selection problem or an incentive problem.

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