Asymmetric Information

… a core term used in Economic Analysis and Atlas102

Definition

The Economist defines asymmetric information as somebody knowing more than somebody else.

The Economist goes on to say:

“Such asymmetric information can make it difficult for the two people to do business together, which is why economists, especially those practising game theory, are interested in it. Transactions involving asymmetric (or private) information are everywhere. A government selling broadcasting licences does not know what buyers are prepared to pay for them; a lender does not know how likely a borrower is to repay; a used-car seller knows more about the quality of the car being sold than do potential buyers. This kind of asymmetry can distort people’s incentives and result in significant inefficiencies.”

Atlas topic, subject, and course

Asymmetric Information, Signaling, and Game Theory (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

The Economist, Economics A-Z, at http://www.economist.com/economics-a-to-z/a#node-21529935, accessed 30 April 2016.

Page created by: Ian Clark, last modified 30 April 2016.