asymmetry of information

asymmetry of information

a situation where the parties to a CONTRACT or TRANSACTION have information available but this information is unevenly distributed between the parties. This information could include the identity of alternative suppliers or customers or product quality or performance. Asymmetry of information is likely to lead to ADVERSE SELECTION or to MORAL HAZARD in transactions. Asymmetric information also applies to the principal-agent relationship (see AGENCY COST) where the principal cannot observe the agent's level of effort. See PRINCIPAL-AGENT THEORY.
References in periodicals archive ?
Another exception to the invisible hand theory is what economists refer to as asymmetry of information.
The blockchain technology enables a faster and cheaper exchange of assets and financial products between individuals without an [intermediary], which reduces the asymmetry of information between the individuals.
Addressing the issue of data ownership, Sharma said that there was asymmetry of information.
The friends said that asymmetry of information can strengthen their bond.
He highlighted some of the challenges which include: weak legal and regulatory frameworks; lack of specialized knowledge; asymmetry of information with respect to key variables of transactions, relevant fiscal and legal tools; high staff turnover in key government agencies and difficulties in retaining qualified and experienced staff.
For example, in a seller/buyer property deal, both parties may be strong (one asking for a very high market price, the other willing to pay a very low market price) in which case the deal may not be consummated; and if they are both weak, or one weak and the other strong, it is likely that only an incentive-compatible legal ruling (so that the parties do not experience problems associated with asymmetry of information such as adverse selection and moral hazard) can enable the entities to complete the deal.
However, although Blaydes and Lo assume imperfect information possessed by civil society to account for the resulting type of regime, our analysis principally examines uncertainty and, more precisely, the asymmetry of information between Tunisian elites--namely, Ben Ali and the military.
The main implication from asymmetric information models is that "hot markets" emerge as a consequence of a reduction in the level of asymmetry of information between the participants in the IPO process that will be reflected into a reduction in the level of underpricing.
Importance of this study is to show the financial analysts, investors and other users of accounting information empirically that asymmetry of information and financial clearness can influence the capital cost.
Readers proceed from an introductory chapter to the public marketplace, where the practice of haggling is analyzed as a system for addressing the asymmetry of information between sellers and buyers resulting from the use of coinage; sellers instantly know the value of the coins they are receiving in a given transaction, but buyers do not have similarly reliable information about goods for sale.
Dunk (1993) studied the relationship between budgetary emphasis, asymmetry of information, participation and budgetary slack, by applying research to the managers of 79 Australian industries.
The Eurasian integration movement is tasked to create favorable conditions for development of integration processes and make all CIS member states participants of integration processes; increase civil activity and political culture among young people of CIS member states; overcome communication barriers between representatives of various nationalities and decrease asymmetry of information flows related to Eurasian integration.