Asymmetric information

Asymmetric information

Information that is known to some people but not to other people.

Asymmetric Information

A situation in which one party to a transaction has information about the transaction to which the other party is not privy. Asymmetric information may result in a bad deal for one party (often but not always the buyer). To give an extreme example, the seller of real estate may know that his property is lined with land mines. This would ordinarily result in a (steep) drop in price, but if the buyer does not know this, it may not. Asymmetric information is not as prevalent as it once was because of increased transparency and legal requirements for disclosure, as well as better technology. Indeed, trading securities with asymmetric information is often illegal. See also: Insider trading, moral hazard, adverse selection.
References in periodicals archive ?
As I discuss later on, some models--which I shall call asymmetric information models of bubbles--can be understood as proper models of bubbles.
Thomas provides examples of market power and barriers to entry, public goods, and asymmetric information as examples of market failure.
As a corporate finance scholar, Garmaise has focused his academic research on using empirical data to investigate the effects of asymmetric information and incomplete contracting as they relate to real estate markets and entrepreneurial firms.
The experiments described address such topics as asymmetric information and bank lending, strategic default with social interactions, divisible-good uniform price auctions, dividends,
By introducing asymmetric information in the dimension of willingness to pay, we find significant changes in the properties of the optimal contract.
Section 2 offers a brief definition of the terms asymmetric information, signaling, and certification.
The memo then lists some examples of market failure: "externality, market power, and inadequate or asymmetric information," with generalized examples of each of these and a couple more claimed market failures.
In cases of asymmetric information, competition is weakened and customers have little access to relevant information, either because it was not revealed or it is too complex to understand.
Uncertainty is bound to increase the level of asymmetric information and the premium placed on private information.
Firms commonly have asymmetric information about their earnings that is not known to investors.

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