match each of the rationales for finacial intermediation listed below with at least one of the following: insurance company, pension fund, savings bank.

a. adverse selection
b. moral hazard
c. lower managment cost generated by larger scale

http://finance.factexpert.com/531-financial-intermediation.php

I am not certain what moral hazard means.

moral hazard- the possibility that a borrower might negage in riskier behavior after a loan has been obtained.

Well, then moral hazard can apply to all. Whomever borrows money, that you approved, should not be changing the use of the money (with its risks) to which you approved.

Insurance certainly would not want to select probable adverse events...unless the risk premium is high.
large scale: all three can benefit from scale.

To match each rationale for financial intermediation with the appropriate institution, let's examine the characteristics of each:

a. Adverse selection: This refers to the situation where individuals with higher risk are more likely to seek insurance or financial services, while those with lower risk may opt out. To mitigate adverse selection, insurance companies are typically the best match. They pool together a large number of individuals and assess risk profiles to determine premiums.

b. Moral hazard: This concept is related to the increased likelihood of risky behavior by individuals once they have financial protection. To address moral hazard, insurance companies and pension funds are often relied upon. Both entities have mechanisms in place to evaluate and manage risk to avoid incentivizing reckless behavior.

c. Lower management costs generated by larger scale: When financial intermediaries operate on a larger scale, they can potentially reduce management costs. This benefit typically applies more to savings banks. As savings banks have a broad customer base and substantial assets under management, they can spread fixed costs over a larger volume, resulting in economies of scale that lower management costs.

In summary:

a. Adverse selection: Insurance company
b. Moral hazard: Insurance company and pension fund
c. Lower management costs generated by larger scale: Savings bank