In response to various comments, I've edited this post to change the title, clarify my fundamental thesis and some terminology choices, and provide explanations for each example. I apologize if this makes some of the existing comments confusing; for posterity, the original version is here.

The high level changes:

1. I changed the title from "Conditional on Getting to Trade, Your Trade Wasn’t All That Great" to "Toward a Broader Conception of Adverse Selection," since I think the former was distracting from the substance of the piece and led to people believing I think trades cannot be positive sum. Thanks in particular to @Thomas Kwa for the gentle advice to change it.
2. I added in an introductory section defining adverse selection, motivating the piece, clarifying some misconceptions, and providing a roadmap for the next posts in the sequence.
3. I reordered the examples and added section headers. The divisions aren't perfect, there's overlap between them, but hopefully this adds some clarity. 
   1. Because of the reordering, some of the comments referring to examples by number might not make sense. The original numbering was:
      1. 1: The Subway Seat
      2. 2: The Juggling Contest
      3. 3: The Bedroom Allocation 
      4. 4: The Thanksgiving Leftovers
      5. 5: The Wheelbarrow Auction
      6. 6: The Wheelbarrow Auction pt 2
      7. 7: The Laffy Taffys
      8. 8: The Field
      9. 9: The Parking Spot
      10. 10: MoviePass
      11. 11: Widgets Inc.
           
4. I explained each section with 1-2 sentences, and added explanations for ~all of the examples. 
5. I added the example "Alice’s Restaurant vs Bob’s Burgers," adapted from a comment I wrote.
6. I included various strategies for combating adverse selection in specific scenarios. I feel conflicted about this, since I'm worried the strategies will distract from the examples and also be redundant with a lot of the content in the second post, but I think this was the right call to help motivate why paying attention to these effects can be useful.
7. I changed a couple of the names
8. I added a few footnotes

I refuse to remove the Karl/Groucho Marx joke.

If too much people pay attention to adverse selection, I'd argue that there's an opposite effect: advantageous selection.

Imagine a world where every venture capitalist only invests in 'hot' rounds. Like this post advocates, they become wary when they're easily able to trade their cash for a company's equity. In this world, the market is inefficient. Supposing you have the cash to keep your portfolio companies alive (e.g., you're SoftBank), you'd be much better off only investing in the companies that other investors don't want to touch. This is because even though the hot startups are on average better startups (because of adverse selection), the low prices you pay for the not-hot startups should more than make up for it. Warren Buffet famously recommends "to be fearful when others are greedy and to be greedy only when others are fearful." And it's a rule of markets that in order to make outsized returns, you need to be both right and contrarian.

The rule I apply is considering the quality of the average market participant's information. Back to your Alice's Restaurant vs. Bob's Burgers example, it'd matter a lot whether the typical eater is a local or a tourist. If it looks like most eaters are locals, they likely have very good information on both places: almost all of them have likely tried both multiple times. But if they're all tourists, people may have just gone to the restaurant because they saw others there. In effect, there's a speculative bubble in Alice's food. So you're probably better going off the beaten path: although Bob's burgers is ceteris paribus of lower quality, the extra benefits (e.g., better service, chef can pay attention to crafting you an excellent burger) will ceteris paribus make up for it!

A common experience in parenting is that a little kid will strongly prefer to play with toys that other kids are playing with, even when there are lots of others sitting around totally available. Conditional on another kid having chosen this toy out of all the options it's probably a better toy!

Promoted to curated: Adverse selections seems like a really useful lens to throw at lots of different things in the world, and I can't currently think of another post on the internet that gets the concept across as well as this one. 

I generally really like starting of a sequence like this using lots of concrete examples, instead of abstract definitions.

I do think there is something tricky about adverse selection in that it is the kind of thing that does often invite a kind of magical thinking or serve as a semantic stopsign for people trying to analyze a situation. People modeling you, or people modeling groups that you are part of, results in tricky and loopy situations, and I've often seen people arrive at confident wrong conclusions based on analysis in this space (though this post, mostly as a list of examples doesn't fall into that error mode, but I find myself curious how future posts in the sequence might handle those cases). 

I really enjoyed this — thank you for writing. I also think the updated version is a lot better than the previous version, and I appreciate the work you put in to update it. I'm really, really looking forward to the other posts in this sequence.

I'd also really enjoy a post that's on this exact topic, but one that I'd feel comfortable sending to my mom or something, cf "Broad adverse selection (for poets)."

More aphoristically: "Never give a sucker an even break."

Re 5 and 6, that's why most normal purchases aren't conducted via auctions: if there's little variability in the product, it's not rare or hard to find, and it's been sold enough that the information asymmetry is negligible, just stick a price tag on it.

Not everyone is out to get you. 

If your BATNA to winning the bid on that wheelbarrow auction is to order it for 120$ of Amazon with free overnight shipping, then winning the auction for 180$ is net negative for you. 

But if your BATNA is to carry bags of sand on your back all summer, then 180$ for a wheelbarrow is a bloody bargain.

Assuming a toy model where dating preferences follow a global preference ordering ('hotness'), then any person showing any interest in dating you is proof that you can likely do better.^[1] But if you follow that rule, you can practically never date anyone (because you are only sampling the field of partners), which leaves a lot of utility on the table because relationships can be net positive for all participants even if they do not precisely match their market values. 

If you want to buy stock to make money from speculation then you need to worry that almost everyone you trade with is better informed than you and you will end up net negative. On the other hand, if you buy stock as a long term investment (tracking some index or whatever) then you probably care a lot less about overpaying one percent.

I think that Zvi mentions a few legitimate examples of things which are out to get you, and their advice to avoid ones with unlimited cost potential is certainly sound.

If I buy toilet paper in the supermarket, I am paying more than the market price. If I wanted, I could figure out what toilet paper costs in bulk, find a supplier and buy a lifetime supply of toilet paper, likely saving a few 100$ in the process. I am not doing this because these amounts of savings over a lifetime are just not worth the hassle. Instead, I trust that competition between discounters mean that their markup is less than an order of magnitude and cheerfully pay their price. 

1. ^{^}

   Don't ask me if that is part of the reason why flirting is about avoiding the creation of common knowledge. I am just some nerd, why would I know?

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These examples all seem like efficient market or winners' curse examples, not varieties of adverse selection, and in equilibrium, we shouldn't see any inefficiency in the examples. 

Adverse selection is such a large problem because a seller (or buyer) can't update to know what type they're facing (e.g a restaurant that sells good food vs bad food) and so offers a price that only one a subset of types would take, meaning there's a subset of the market that gets doesn't get served despite mutually beneficial transactions being possible. 

In all of these examples, it's possible to update from the signal - e.g. the empty parking spot, the restaurant with the short line - and adjust what you're willing to pay for the goods.  

I think these examples make the important point that one should indeed update on signals, but this is different to adverse selection because there's a signal to update on, whereas in adverse selection cases you aren't getting separating equilibria unless some types drop out of the market. 

reminded me of https://en.wikipedia.org/wiki/Winner%27s_curse

lol laffy taffy is too real banana sucks

Relevant quote from Dragonfired by J. Zachary Pike. "Brokers make money by knowing key information; they make fortunes by ensuring that other brokers remain unaware or unsure of the same information until after critical trades."

I use eBay somewhat regularly, and I've found that most of the time I get what I expected at a reasonable price. So I find the theory that I should always regret participation in any auction somewhat dubious.