Question

I am sure you are familiar with online auction and sales sites like Ebay or Etsy. How do they address the adverse selection problems?

Answer 1

ans....
Websites like ebay are dealing with the problem of adverse selection by giving buyers facilities like after sales services, warranties and guarantees etc. on products which are genuinely good.
This makes the buyer understand that those goods are better quality goods and should be bought.
For eg if there are two sellers selling a car with only one providing after sale service. Then the buyer will always prefer the one with after sales service because it is like a signal for good quality.
So these websites make sure that sellers are selling good quality products by making sure such services or facilities are provided by them.