I think habryka’s explanation of this post’s idea of adverse selection is basically correct:
I think all of them follow a pattern of “there is a naive baseline expectation where you treat other people’s maps as a blackbox that suggest a deal is good, and a more sophisticated expectation that involves modeling the details of other people’s maps that suggests its bad”
In example #8, you naively think that a market order will clear at slightly more than the going rate for a field, which it will in a normal competitive market. But in this case, you let your counterparty decide the price, and they’re incentivized to make it maximally bad for you.
My guess is that some later post in the sequence will argue why this broad definition of adverse selection makes sense.
I think habryka’s explanation of this post’s idea of adverse selection is basically correct:
In example #8, you naively think that a market order will clear at slightly more than the going rate for a field, which it will in a normal competitive market. But in this case, you let your counterparty decide the price, and they’re incentivized to make it maximally bad for you.
My guess is that some later post in the sequence will argue why this broad definition of adverse selection makes sense.