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In this case the high appetite customers are more likely use the information they have and to go to the restaurant.
An additional implication of this potential for market collapse is that it can work as an entry deterrence that leads to high margins without additional entry.
Eventually, the higher prices will push out all non-smokers and the insurer will also be unwilling to sell to smokers.
No more interactions will take place, and the life insurance market will collapse.
If risk aversion is higher among lower-risk customers, adverse selection can be reduced or even reversed, leading to "advantageous" selection.
This occurs when a person is both less likely to engage in risk-increasing behavior are more likely to engage in risk-decreasing behavior, such as taking affirmative steps to reduce risk.