Adverse Selection

A.K.A. "asymmetric information," this occurs when one party to a transaction (either buyer or seller) has information that the other lacks, especially regarding product quality, ability to pay, or other factors that may otherwise alter decision-making.

If Little Johnny plans to execute a "dine and dash," the restauranteur is expecting to be paid for the meal served, only to be adversely surprised when Little Johnny disappears without settling up (or tipping). Other examples would be Shawn White buying health insurance without mentioning his X-Games profession, a sleazy used car salesman doing stereotypical, sleazy used car salesman stuff, or the guy running the "three card Monty" game on the corner. More often, though, it is the seller who is aware of issues with the product they are hawking, which is why the phrase "caveat emptor" ("buyer beware") is more commonly heard than "caveat vendor" ("seller beware").