kaal:claim:3949098-020

In traditional underwriting, investors who cannot distinguish underwriters by reputation create free riding: once free riding occurs, underwriters stop investing in screening and try to free ride on others, producing a lemons problem.

Source quote, verbatim

As a result, free-riding on other's reputation may occur. Once free riding occurs, traditional underwriters will likely stop investing in their screening and instead attempt to free ride on others. This creates what is known as a lemons problem in the law and economics literature.

From

Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021), II. Basic Concept, 4. Decentralized Underwriting, p. 13
https://ssrn.com/abstract=3949098 · source PDF

Cite as

Wulf A. Kaal, Reputation as Capital – How DAOs Upgrade Finance (2021). SSRN: https://ssrn.com/abstract=3949098

Holds when

traditional underwriting markets
investors cannot distinguish underwriters based on reputation

Classification

failuresupport: arguedfailure: Underwriter Screening Free Ride And Lemons Problemfamily: information-asymmetrydefi

Verify

The quote above is an exact substring of the source PDF, whose sha256 is 04297905564a6092b2db7640561f58fd374d3114c79527357bad09d11b909819. Extraction method: pdf-text-layer.
Attestation record: colloquium/attestations/3ad81924e697db7c...json
Verify the binding yourself: curl -s https://wulfkaal.github.io/claims/3949098-020.md | sha256sum