Podcast
Questions and Answers
What is the definition of symmetric information?
What is the definition of symmetric information?
Which of the following best describes hidden action?
Which of the following best describes hidden action?
What is an example of hidden characteristic?
What is an example of hidden characteristic?
What behavior does asymmetric information lead to?
What behavior does asymmetric information lead to?
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What happens when both parties have equal or equally limited information in a transaction?
What happens when both parties have equal or equally limited information in a transaction?
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Study Notes
Asymmetric Information
- Symmetric information refers to a situation where all parties in a transaction have equal access to information.
- Asymmetric information, on the other hand, occurs when one party has more or better information than the other party in a transaction.
Hidden Action and Hidden Characteristics
- Hidden action refers to a situation where one party takes an action that is not observable to the other party, affecting the outcome of the transaction.
- Hidden characteristic is a trait or feature of a good or service that is not observable to the buyer, such as the quality of a used car.
Consequences of Asymmetric Information
- Asymmetric information can lead to adverse selection, where one party takes advantage of the other party's lack of information, resulting in a bad deal for the uninformed party.
- When both parties have equal or equally limited information in a transaction, the transaction is said to have symmetric information, which can lead to more efficient outcomes.
Note: These study notes summarize the key concepts and definitions related to asymmetric information, hidden action, and hidden characteristics.
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Description
Test your knowledge of asymmetric information in economics with this quiz. Learn about hidden characteristics and hidden actions in transactions, and how they can create information imbalances between parties.
