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 ?
In a developing country with severe market failures, issues of acute asymmetry of information, and weak regulatory framework towards both controlling speculative activity and foreign portfolio investment, this policy will not help 'promote strong and sustainable growth in Pakistan' to quote the thinking of the currently acting managing director (and previously, deputy managing director) of IMF, David Lipton.
incentives and asymmetry of information between builders, buyers and bankers.
There is also a need for insurers to protect themselves against the mounting threat of asymmetry of information, anti-selection and regulation banning the use of genetic information in underwriting.
After all, rankings constitute an important source to reduce the asymmetry of information in a massive market such as that of higher education, allowing comparison between institutions on a common basis, favoring in this way the decision making in different levels and environments.
In most cases, the problem has been about the asymmetry of information, something that both governments have taken steps to overcome in recent years.
(13.) See Akerlof supra note 12, at 489-490 (illustration of effects of asymmetry of information between buyer and seller).
This has triggered the need for the authorities to cooperate with their international counterparts in order to reduce the risk of diverging assessments and asymmetry of information in parallel procedures.
Another exception to the invisible hand theory is what economists refer to as asymmetry of information. This is when either the seller or the buyer possesses information about the product or
A good example of the problem that this asymmetry of information can have comes from Ghana, which began oil production from its Jubilee Field in 2010.
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.'
Thus, the lower the BTD, the lower the quality of earnings and, consequently, the greater the asymmetry of information.
Asma Hunaid, a Pakistani consultant based in Sharjah, said: "Asymmetry of information doesn't necessarily have to negatively affect a friendship.