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 "identifier": "kaal:entity:adverse-selection",
 "name": "Adverse selection",
 "termCode": "adverse-selection",
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  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/1428387-012",
   "identifier": "kaal:claim:1428387-012",
   "text": "There is an adverse selection problem in independent valuation: an administrator who actually had the knowledge and understanding of complex instruments required for the task would probably be incentivized to use that expertise in a more profitable setting instead.",
   "abstract": "Had the administrator the required knowledge and understanding of the complexities, he or she would probably be incentivized to use that experience and understanding in a more profitable setting.",
   "citation": "Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387",
   "datePublished": "2009",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "for administrators valuing highly complex instruments"
   ],
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   "@id": "https://wulfkaal.github.io/claims/1428387-033",
   "identifier": "kaal:claim:1428387-033",
   "text": "Mandatory risk disclosure to the SEC would probably fail on staffing grounds, because professionals capable of understanding hedge fund risk data would be disincentivized to use that knowledge for supervision rather than economic gain, finding the private sector far more lucrative.",
   "abstract": "Professionals who could understand the risk data would probably be disincentivized to use their knowledge for purposes of supervision rather than economic gain. Knowledgeable risk analysts may find the private sector much more lucrative than the public sector.",
   "citation": "Kaal, Hedge Fund Valuation Retailization, Regulation, and Investor Suitability (2009). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1428387",
   "datePublished": "2009",
   "claim_type": "failure",
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    "where the regulator must interpret data on hard-to-value assets and complex instruments"
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   "@id": "https://wulfkaal.github.io/claims/3962614-006",
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   "text": "Because time spent raising capital from limited partners is time taken away from portfolio company due diligence, the current VC model tends to reflect the networking and public relations ability of the general partner instead of their capital allocation ability.",
   "abstract": "Because of this dynamic, the current VC model tends to reflect the networking and public relations ability of the VC's general partner instead of their capital allocation ability.",
   "citation": "Wulf A. Kaal, REPUTATION AS CAPITAL – How Decentralized Autonomous Organizations Address Shortcomings in the Ventu (2021). SSRN: https://ssrn.com/abstract=3962614",
   "datePublished": "2021",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "traditional fiat VC funds that must continuously raise capital from limited partners"
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  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/5886442-019",
   "identifier": "kaal:claim:5886442-019",
   "text": "Hidden action, that is moral hazard, and hidden information, that is adverse selection, are not merely reduced in the agentic economy but rendered computationally impossible at the substrate level, because every intermediate computation is attested on chain or through zero knowledge proofs.",
   "abstract": "Every intermediate computation is attested on-chain or via zero-knowledge proofs. Hidden action (moral hazard) and hidden information (adverse selection) are not merely reduced. They are rendered computationally impossible at the substrate level",
   "citation": "Wulf A. Kaal, The AI-to-AI Economy and the Collapse of Anthropocentric Economic Theory (2025). SSRN: https://ssrn.com/abstract=5886442",
   "datePublished": "2025",
   "claim_type": "mechanism",
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   "is_failure_mode": true,
   "scope_conditions": [
    "holds among artificial agents, not for the remaining human layer"
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/6244278-009",
   "identifier": "kaal:claim:6244278-009",
   "text": "Non-transferability of reputation is essential because, in Akerlof's lemons terms, a transferable reputation market would let capital-rich but competence-poor actors purchase reputation and thereby destroy the signal's informational content.",
   "abstract": "In the language of Akerlof's lemons analysis, non-transferability prevents the emergence of a market in which capital-rich but competence-poor actors purchase reputation, undermining the signal's informational content.",
   "citation": "Wulf A. Kaal, AI's Mother's Instinct Engineered Consequence Emergent Ethics and the Institutional Trajectory Toward Agentic Alignment (2026). SSRN: https://ssrn.com/abstract=6244278",
   "datePublished": "2026",
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   "scope_conditions": [
    "requires soulbound or agent-bound credentials tied to persistent identities"
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   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/6607458-033",
   "identifier": "kaal:claim:6607458-033",
   "text": "Without a verification record accessible to counterparties, generative markets suffer a generative-quality failure analogous to the lemons problem: counterparties price on the distribution of observed qualities, which systematically underprices high-quality generators.",
   "abstract": "The computative analog is a generative-quality failure: when the quality of a generative distribution is unobservable, counterparties price on the distribution of observed qualities, which systematically underprices high-quality generators.",
   "citation": "Wulf A. Kaal, Computative Economics A Framework for Economic Analysis under Computational Abundance (2026). SSRN: https://ssrn.com/abstract=6607458",
   "datePublished": "2026",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
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    "holds when the quality of a generative distribution is unobservable to counterparties"
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 "description": "6 claims in the published works of Wulf A. Kaal carry the concept tag 'adverse-selection'. Derived node: a roster, not an adjudicated definition."
}