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.