Business, Motivation, Buffet

The first case is a perfect example of adverse selection problem. Adverse selection problem also known as pre-contractual problem is a phenomenon in which the purchaser or trader enters into a transaction with another party that possesses more information. The nature of information in such cases is asymmetric i.e. unbalanced - one party may it be the buyer or seller has more information about subject under consideration. In the case under consideration, though the buffet is being offered at a fixed price level, the clientele for this proposition differs from the routine set of consumers. The major reasons for this are that the consumers approaching the restaurant have a predetermined set of preferences, price range and consumption patterns. They dont possess the relevant information and