What are asymmetric information?

Asymmetric information is an economic model that examines what happens when one side in the transaction knows more than another. For example, an antique buyer could carefully explore a set of rare antiques than it appears at the auction of assets, and therefore can know much more about a particular work than the seller. Information asymmetry between the buyer and the seller can lead to various dilemmas and interesting situations. In particular, information asymmetry causes two problems: unfavorable choice and moral danger. For example, a person who is patient can hide this information from a potential insurer to qualify for a lower premium. Likewise, a person with a high -risk lifestyle can try to buy additional insurance to avoid expensive medical accounts. In other words, buyers know something about their health that his insurator is not. This asymmetric information uses unfairly to its benefit to get a better price. Meanwhile, the insurer suffers financially.

Moral danger results in information asymmetry. For example, if a person is issued a credit card without the expenditure limit and continues to spend beyond their ability to pay, which would result in failure, this would be considered a moral danger. Credit card companies absorb most of the consequences of irresponsible consumer behavior. Similarly, if the Government of the country for its banking industry has a calculation policy, banks may be more inclined to provide unsecured or risky loans that have not been known to the government; The bank hopes for high interest rates, but knows that it will not lose too badly, because the government unknowingly covers losses. Increased likelihood of risky behavior based on asymmetric information is the basis of moral danger.

pioneers of information asymmetric concepts, George Akerlof, Joseph Stiglitz and Michael Spence, began to write about these theories in60. In particular, the book Acerlof, Lemons market has shown that information asymmetry can and can lead to immoral economic decisions. In a difficult situation, they can even lead to the decrease and scattering of whole markets.

Thanks to the arrival of online resources, such as public boards, today's consumers can use asymmetric information to their advantage. For example, buyers can explore insurance rates, car prices and restaurants and hotels online and learn a lot about what customers have said about companies. In the past, these buyers had much less information to formulate services or companies. However, this advantage is a double -edged sword. While the Internet provides consumers' effect, businesses can also use online sources to develop or even expand its information advantages over consumers. Companies can now use tools to explore online markets to determine consumer habits and click on the market to develop marketing campaigns to useLK carefully obtaining consumer habits.