Adverse Selection and Pedophiles

I spend a lot of time on adverse selection in my game theory class. Basically, adverse selection occurs when the people who most want to interact with you are those you least want to interact with.

So, for example, if you try to buy a used car the people most eager to sell you a used car are those who have very poor quality cars. Or, if your firm tries to hire someone for an $80,000 a year job the people who would most want this job are those whose lack of skills normally makes it impossible for them to get a job that pays anywhere near $80,000 a year.

Another example I use involves pedophiles and jobs where employees have access to young children. Pedophiles will be highly attracted to such jobs. (Of course, the vast majority of people interested in these jobs won't be pedophiles.) Consequently, I tell my students that a practical application of adverse selection theory is that day care centers should have strong employee screening.

My son goes to the daycare run by my college. Yesterday we got an email from the daycare center saying that an employee was arrested for possession of child pornography. None of his charges, fortunately, relate to his employment at the daycare center.

Apparently the man's backpack was stolen. He reported this to the police even though the package contained criminal images of children. These pictures were found in a public rest room and the police determined that they were his. He confessed.