Abstract Market-based instruments are increasingly incorporated into developing countries’ environmental regulation, which has historically been dominated by command-and-control (CAC). To discover whether this shift can enhance efficiency, the two policy instruments are compared in the context of agricultural fire regulation. We unveil optimal policy principles, such as incentivizing compliance proportionally to non-compliance’s net benefit. A simulation based on data from Brazilian Amazon municipalities accounts for ambiguous land tenure, indirect deforestation and non-additionality. The results reveal that CAC, when perfectly sanctioned, is more efficient than market-based policy. Such primacy is exacerbated in the realistic case where sanctions are likely to be cancelled on appeal to the judicial power and legally limited in size, because of the opportunities to better address adverse selection and to generate revenue with fines. Therefore, we show that market-based policy is not necessarily superior to CAC and that imperfect sanctioning does not inevitably lead to inefficiency.

This paper analyzes factors affecting school absenteeism due to an injury or illness among the US school student population between 6 and 15 years of age. The number of missed school days displays overdispersion and is modeled using the Finite Mixture Roy (FMR) model for count variables. The married/single parent family status (treatment) is potentially endogenous to the dependent variable (missed days). The Roy structure controls observed heterogeneity due to the mother’s marital status. Finite mixtures are intended to control unobserved heterogeneity due to healthy and unhealthy children in the sample. This approach facilitates identification of latent subpopulations in which treatment and marginal effects are relatively homogeneous. The model also incorporates two application-driven extensions. First, probabilities of the latent components are modeled as functions of regressors. Secondly, the mother’s income affects treatment nonparametrically. The FMR model is estimated with two latent components in each state, corresponding to healthy and unhealthy students. The results indicate that maternal marital status decreases annual missed school days by approximately 13 percent for a randomly drawn child; however, this increases absenteeism by about 14 percent among families that self-select into two-parent households, which is evidence of adverse selection.

According to the economic theory of adverse selection, a general failure to signal the quality of a product or service can lead to lower prices, which forces good quality out of the market and may lead to market collapse. Applied to translation services, this suggests that a strong certification system, as a signal of quality, should stabilise the market. Australia has perhaps the world’s most developed system for the certification of interpreters and translators, and yet there are indications of adverse selection: up to a third of practitioners self-report that they are likely to leave the sector. We therefore ask whether professional certification has actually had a stabilising effect on the Australian market. To address the question, we evaluate several other factors that could contribute to adverse selection: an oversupply of certifications may drive prices down; low remuneration may be endemic; deceptive business practices can skew the signalling of quality; public discourse can lead to low trust in professionals, independently of quality; and uncertified community members can take over translation functions. Quantitative and partly longitudinal data and interviews with 35 stakeholders suggest that these factors may indeed combine to produce downward pressures on the market, and that no certification system can be expected to counter all those effects. Other remedies are also required.

Purpose This paper aims to investigate how temporal configurations – specifically lead time and closing days – determine success rates and price premiums in mandatory public asset sales. Design/methodology/approach Analysing 81,470 Indonesian transactions (2022 to 2023), the study employs binary logistic and Ordinary Least Squares regressions to isolate temporal effects on auction outcomes, controlling for asset and bidder heterogeneity. Findings Results reveal a “duration paradox”: longer lead times generally signal adverse selection, reducing success probabilities. However, this is mitigated by two distinct mechanisms: “Monday Synergy” (demand-side), which maximizes price premiums through weekend information processing, and the “Thursday Anchor” (supply-side), where auctions exhibit procedural resilience against long lead times due to institutionalized administrative cycles. A “Digitalization Trade-off” is also confirmed, where internet auctions increase participation but reduce competitive intensity and premiums compared to conventional formats, even after accounting for asset heterogeneity. Research limitations/implications Limitations include the single-country context. Future research should use experimental designs to validate behavioural mechanisms and cross-country institutional applicability. Practical implications The study advocates a “Bimodal Scheduling Framework”: Monday closings for revenue maximization and Thursday closings for administrative resilience. Managers must also balance digital access with competitive arousal. Social implications Efficient sales bolster fiscal sustainability and state revenue (PNBP) without tax hikes. Evidence-based scheduling increases transparency and public trust in government resource management. Originality/value To the best of the authors’ knowledge, this is the first study to treat scheduling as an integrated strategic variable synchronizing market psychology with bureaucratic capacity. It introduces the “duration paradox”, “Monday Synergy” and “Thursday Anchor”, providing a framework for effective public asset disposal.

The quantitative effect of several inhibitory drugs on the development of adverse drug reactions (ADRs) is currently difficult to estimate. Our aim was to identify metabolic pathways, which, when inhibited, increase the risk for certain ADRs, and to use this system to consider comedication at individual level. Data of a prospective multicentre cohort of ADRs on emergency department admissions were used (ADRED-study, trial registration: DRKS00008979). A score system to rate the burden of inhibition on pathways was implemented to calculate individual burdens per patient. These cumulative burden scores were used as predictors in binary logistic regressions to identify pathways, which were significantly positively correlated with the ADRs falls and haemorrhages, respectively. Regarding falls, CYP2D6, OCT2 and carboxylesterase 1 were identified as relevant metabolic pathways with cumulative inhibitory burden. Concerning haemorrhages, CYP2C19, CYP3A4, MRP4, OAT2, OATP1B1 and carboxylesterase 1 were determined. Within relevant pathways for the occurrence of falls, common fall-risk-increasing drugs (FRIDs) and associated drugs were found, as well as bleeding inducing drugs within relevant pathways for the occurrence of haemorrhages. Our approach identifies plausible inhibited pathways, raising awareness that a high burden of pathway inhibition can contribute to the occurrence of ADRs. Further validation in a second dataset is necessary.

ABSTRACT We analyze a setting in which physicians, who differ in their degree of altruism, first exert diagnostic effort before deciding whether to administer a test to determine the most appropriate treatment. Diagnostic effort yields an imperfect private signal of the patient's type, whereas the test provides a more accurate assessment. Absent corrective transfers, physicians exert too little diagnostic effort and may rely excessively on testing. When altruism is either homogeneous or observable, the first‐best allocation can be decentralized through a payment scheme consisting of (i) a pay‐for‐performance (P4P) component, based on the proportion of correctly treated patients, to induce the optimal diagnostic effort and (ii) a fixed component to ensure both the optimal testing decision and physician participation. When altruism is heterogeneous and privately known to physicians, the two‐part tariff that decentralizes the first‐best is no longer incentive compatible. The optimal contract is pooling rather than separating, an instance of nonresponsiveness. Its uniform P4P component induces more altruistic physicians to exert higher diagnostic effort, while the fixed component must be conditioned on diagnostic test costs to promote optimal testing decisions.

Abstract Capital regulatory requirements are one of the prominent mechanisms to control bank credit risk-taking behavior and subsequently achieve financial stability. The study aimed to evaluate the moderating role of revenue diversification in the relationship between capital adequacy and credit risk behavior of 102 listed South Asian banks. We collected data from DataStream covering the period from 2011 to 2022. The study employed a fixed effect panel data model, system GMM, a two-step system dynamic panel estimation technique, and the Sargan test to analyze study results, resolve potential endogeneity problems, effectively use short time period and long cross-section dataset, and achieve instrument validity, respectively. We conclude that South Asian banks face low levels of credit risk and the interaction of revenue diversification with the capital adequacy ratio significantly and negatively reduces credit risk. The findings implicate little adverse selection problem among South Asian banks and the need for expanding non-traditional income sources while fulfilling regulatory capital requirements.

Abstract This paper proposes a spatial model of imperfect competition in markets with adverse or advantageous selection. The model shows that a reduction in competition exacerbates the inefficiency created by adverse selection but can ameliorate the inefficiency created by advantageous selection. However, reduced competition never corrects the inefficiency perfectly because it introduces an allocative inefficiency. By contrast, the inefficiency can be corrected perfectly through a corrective tax when there is perfect competition. Our results have implications for competition policy in credit and insurance markets, as they caution against viewing imperfect competition as a solution to the inefficiencies created by selection.

Modeling the blockchain-related insurance contracts with moral hazard and adverse selection

To mitigate adverse selection in Medicare Advantage (MA) and traditional Medicare plans, MA enrollees are only allowed to switch between MA plans or enroll in traditional Medicare during specific open enrollment periods. However, during the past decade, regulators relaxed these enrollment periods to facilitate switching throughout the year. Using administrative data from the period 2015-22, we documented that among incumbent MA enrollees, an increasing share of switching to other MA plans or traditional Medicare occurred outside the standard Medicare open enrollment period. Compared with Medicare open enrollment period switchers, alternative enrollment period switchers tended to have higher risk scores and hospitalization rates before switching. In addition, beneficiaries who switched to traditional Medicare or broader-network plans tended to have higher risk scores and hospitalization rates before switching than those who switched to other plans. Our results highlight a trade-off: Flexible enrollment periods may allow some beneficiaries to enroll in plans that better suit their needs but may also allow beneficiaries with higher medical costs to sort into certain MA plans or traditional Medicare, which potentially generates adverse selection if other selection mitigation policies are insufficient.

Women's empowerment through financial inclusion is an important sustainable development goal. Formal institutions and banks are hesitant to lend to the poor due to the lack of collateral and information asymmetry. The self-help groups address this gap through a social contract based on social capital and joint liability. The joint liability gives rise to a peer mechanism in the form of peer selection, monitoring and peer sanctions. This study examines how peer group in West Bengal, India, using data from 400 members and ordered logistic regression. As per the findings, peer selection reduces adverse selection, and peer monitoring mitigates moral hazard among the members of the group. Further leadership and access to technology strengthen the repayment behaviour. However, excessive peer sanctions can lead to increased misuse of funds. The study aims to highlight the potential limitations of the peer mechanism in reducing information asymmetry and increasing repayment of loans with policy implications.

Urbanisation reshapes rural populations and cultural traditions, driving tourism-led revitalisation but often producing community exclusion. Understanding community exclusion and its resolution is vital for sustainable rural tourism. Although prior studies have suggested enhancing place attachment by adjusting tourism strategies, they rarely examine the government’s agency and interactions with native residents. Based on fieldwork in Goulan Yao and Qianmei Village in China, this study applies Principal-Agent Theory to analyse pathways for resolving community exclusion and differences in resident perceptions. The findings indicate that in Goulan Yao, spatial separation pathways, which segregate tourism and living areas, weaken native residents’ place attachment and create moral hazard. In contrast, Qianmei establishes a local connection pathway through early communication and information sharing. This pathway strengthens social place attachment and mitigates both adverse selection and exclusion risks. Comparative analysis shows that community exclusion lies in the agents’ attachment agency. Attachment agency is manifested in residents’ attitudes towards tourism development policies. Its core mechanism is reflected in the distributive, procedural, and interactional fairness concerning physical place attachment. Attachment agency provides a conceptual lens for tourism geography to analyze the agency of village officials and the micro-interactions among residents within the context of community exclusion in rural tourism. These findings suggest that rural tourism should adopt a resident-centred development model. To protect native residents’ rights, village committees form discourse coalitions and implement benefit-feedback mechanisms while preserving existing spatial patterns.

Abstract We find that CEO compensation increases following acquisitions only in those deals in which acquirer stock is used as the method of payment. These compensation increases are driven by increases in equity-based compensation and are concentrated in riskier acquirers, in riskier acquisitions, and in acquirers whose CEOs have low exposure to the stock price. We find little support for traditional agency cost explanations of changes in CEO pay following acquisitions. However, our findings are broadly consistent with compensation changes representing a contracting solution to a two-sided adverse selection problem that is present only in stock acquisitions.

We extend the Rothshild and Stiglitz (1976) model to two sources of risk -inpatient and outpatient risk- to better proxy real-world health insurance markets. We uncover an interesting theoretical possibility: Take individuals A and B, who are low risks in, say, the inpatient dimension but A is riskier in the outpatient dimension. Then, A may enjoy less coverage than B in the inpatient dimension (coverage reversal). This phenomenon indicates that when testing for adverse selection in a given dimension, one has to treat individuals who differ in the other dimension separately. With this insight in mind, we adapt the Chiappori and Salanié (2000) positive correlation test to this multi-dimensionality and use it to test for adverse selection using individual-level claims data for the privately insured in Chile. This empirical analysis indicates that overlooking the aforementioned need of separating samples can potentially lead to biased conclusions.

Abstract This study evaluates how ESG strategic intensity and AI capability shape risk-adjusted lending performance in ASEAN-5 banks, grounding the model in the Resource-Based View (RBV) and Institutional Theory to explain how internal capabilities and external regulatory forces interact. Using a cross-sectional survey of 486 banking professionals from 62 listed commercial banks across Indonesia, Malaysia, the Philippines, Singapore, and Thailand, relationships were estimated via PLS-SEM with standard robustness checks, including multicollinearity, reliability, validity, and predictive relevance, while mediation and moderation were assessed through bootstrapped indirect effects and interaction terms. The results show that ESG strategic intensity directly improves risk-adjusted lending performance, while AI capability influences performance only indirectly. Both ESG and AI strongly enhance credit-risk discipline, which itself is a key driver of lending performance. ESG retains a direct path to performance while also working through credit-risk discipline, its effect reflects partial mediation. In contrast, the effect of AI operates entirely through credit-risk discipline, indicating full mediation. Regulatory pressure strengthens the influence of both ESG and AI on credit-risk discipline, demonstrating that stricter supervisory environments amplify the translation of sustainability and technological capabilities into more disciplined lending practices. These findings underscore CRD as the operational hinge through which sustainability and digital capabilities are converted into superior lending outcomes, highlighting the importance of governed data pipelines, explainable risk models, and effective early-warning mechanisms, supported by aligned managerial incentives and supervisory expectations. At the societal level, disciplined ESG- and AI-enabled lending reduces information frictions, supports equitable credit access for credible SMEs and households, stabilizes credit cycles, and mitigates adverse selection when paired with safeguards on privacy, transparency, and bias control. Overall, the study offers an integrated, theory-driven, institution-level assessment of how ESG and AI capabilities translate into measurable performance within a multi-country ASEAN context, clarifying when and how strategic and regulatory forces jointly improve credit outcomes.

Adverse selection in reverse mortgages: Evidence from South Korea

Adverse Selection and Information Chasing in OTC Markets: Whose Information Matters and Why?

International audience

A novel method for testing adverse selection with IoT data: Evidence from China's auto insurance market

Background: Achieving universal health coverage is the biggest challenge in post-conflict situations. Community-based health insurance is an alternative mechanism to improve healthcare utilization and coverage through a prepayment mechanism and pooling health risks in the informal sector. However, there is limited data on the feasibility of community-based health insurance in countries emerging from conflict or war. Objective: This systematic review aims to summarize the evidence on the feasibility of implementing community-based health insurance in post-conflict situations. Methods: The search process included peer-reviewed and gray literature published between 1990 and 2023 in the electronic databases of Global Health, Pub Med, CINAHL, Science Direct, and Gray Publications. The search was conducted manually on December 10, 2023. We conducted a systematic review of articles published since 1990 using a search strategy. The Mixed Methods Assessment Tool (MMAT) was used for quality assessment to evaluate the methodological quality of various studies. Results: In this review, a total of 30 articles were included and synthesized. Out of the eligible articles, cross-sectional studies, issue reports, and strategic documents were reviewed. In general, 66.7% of the studies were qualitative, and 33.3% were quantitative. We summarize and describe the feasibility of introducing community health insurance, its impact on universal health coverage, and the limitations of financial risk allocation and protection in the postwar period. Community-based health insurance (CBHI) schemes face several significant obstacles, such as poor financial risk protection, a limited risk pool, adverse selection, a lack of professional and standardized management, and a lack of availability and quality of services. Although they are less successful in reaching marginalized populations, community-based health insurance programs with access to external or additional funding sources are more successful in extending access to healthcare services and offering financial security. Regardless of scheme type, community-based health insurance schemes that involve the community in the design and implementation process are more effective at guaranteeing access to healthcare and financial protection. Furthermore, households with community-based health insurance have lower out-of-pocket medical costs, high odds of overall healthcare utilization, outpatient service use, health facility deliveries, and a lower frequency of catastrophic medical costs at various thresholds. Conclusions: Community-based health insurance (CBHI) schemes have emerged as an alternative health financing mechanism in low- and middle-income countries. These schemes aim to improve access to healthcare and provide financial protection. However, their effectiveness is limited by several challenges. Studies have found that community-based health insurance schemes often exclude the ultra-poor and suffer from adverse selection. While there is evidence that community-based health insurance increases healthcare utilization, particularly for outpatient services, and reduces out-of-pocket spending, the overall impact remains small. Key challenges include limited risk pools, poor financial risk protection, and a lack of quality services. Factors influencing enrollment and sustainability include awareness, trust, perceived service quality, and community involvement. Despite some positive outcomes, community-based health insurance schemes are considered complementary to more effective health financing systems rather than a standalone solution.