Both problems may raise insurance costs and reduce efficiency by driving otherwise willing transactors from the market ("incomplete markets"). Moreover, attempting to reduce one problem, say adverse selection by mandating insurance, may add to another, say moral hazard. Information economics, which studies such problems, has relevance in subjects such as insurance, contract law, mechanism design, monetary economics, and health care. Applied subjects include market and legal remedies to spread or reduce risk, such as warranties, government-mandated partial insurance, restructuring or bankruptcy law, inspection, and regulation for quality and information disclosure.
Both problems may raise insurance costs and reduce efficiency by driving otherwise willing transactors from the market ("incomplete markets") Moreover attempting to reduce one problem say adverse selection by mandating insurance may add to another say moral hazard Information economics which studies such problems has relevance in subjects such as insurance contract law mechanism design monetary economics and health care Applied subjects include market and legal remedies to spread or reduce risk such as warranties government-mandated partial insurance restructuring or bankruptcy law inspection and regulation for quality and information disclosure