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HISTORICAL COST: An accounting principle stating that expenses are recorded in terms of original or acquisition cost. Such a practice does not necessarily indicate the opportunity cost or current market value.
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ADVERSE SELECTION An inefficient, bad, or adverse outcome of a market exchange that results because buyers and/or sellers make decisions based on asymmetric information. This commonly results in a market that exchanges a lesser quality good, what is termed the market for lemons. Two related problems resulting from asymmetric information are moral hazard and the principal-agent problem. Two methods of lessoning the problem of adverse selection are signalling and screening.
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Cyrus McCormick not only invented the reaper for harvesting grain, he also invented the installment payment for selling his reaper.
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"The truth is not for all men, but only for those who seek it. " -- Ayn Rand, writer
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LRD
Longitudinal Research Database
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