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Alternatively, situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, life insurance, or sales of old art pieces without a prior professional assessment of their value. This situation was first described by Kenneth J. Arrow in an article on health care in 1963. [5]
Two-way asymmetrical model Two-way communication (imbalanced) Uses persuasion and manipulation to influence audiences to behave as the organization desires. Differs from the press agentry model through the use of research to find out how best to persuade stakeholders: Two-way symmetrical model Two-way communication
Adverse selection models can be further categorized into models with private values and models with interdependent or common values. In models with private values, the agent's type has a direct influence on his own preferences. For example, he has knowledge over his effort costs or his willingness-to-pay.
The Excellence theory is a general theory of public relations that “specifies how public relations makes organizations more effective, how it is organized and managed when it contributes most to organizational effectiveness, the conditions in organizations and their environments that make organizations more effective, and how the monetary value of public relations can be determined”. [1]
More simply, when deciding between two options, an unattractive third option can change the perceived preference between the other two. [2] The decoy effect is considered particularly important in choice theory because it is a violation of the assumption of "regularity" present in all axiomatic choice models, for example in a Luce model of ...
Screening techniques are employed within the labour market during the hiring and recruitment stage of a job application process. In brief, the hiring party (agent with less information) attempts to reveal more about the characteristics of potential job candidates (agents with more information) so as to make the most optimal choice in recruiting a worker for the role.
Akerlof considers a situation in which demand D for used cars depends on the cars price p and quality μ = μ(p) and the supply S depends on price alone. [1] Economic equilibrium is given by S(p) = D(p,μ) and there are two groups of traders with utilities given by:
Below is an example of the fourfold pattern of risk attitudes. The first item in each quadrant shows an example prospect (e.g. 95% chance to win $10,000 is high probability and a gain). The second item in the quadrant shows the focal emotion that the prospect is likely to evoke.