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information asymmetry
Sign in to saveeconomics term for when one party in a transaction has an advantage in information
Wikidata facts
- Subclass of
- information
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- topic's main category
- Category:Asymmetric information
- has characteristic
- asymmetry
- P13411
- September 13
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via Wikidata · CC0
~40 min read
Encyclopedic overview
In an asymmetric balance of power, one side has more information than the other. In contract theory, mechanism design, and economics, an information asymmetry is a situation where one party has more or better information than the other.
Information asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to be inefficient, causing market failure in the worst case. Examples of this problem are adverse selection, moral hazard, and monopolies of knowledge.
Excerpted from Wikipedia’s “information asymmetry” article, available under the CC BY-SA 4.0 licence.