Asymmetric Information

Understanding information asymmetry is fundamental to successful business interactions and negotiations, as companies and consumers invariably hold imperfect information about one another. Using case studies and critical success factors, the concept explains how companies can use information asymmetry to their advantage.

Technique Overview

Asymmetric Information

Asymmetric Information Definition

An information asymmetry happens when there is a difference in access to relevant knowledge (Mankiw, 2011). Although it is usually buyers and sellers that have different information, there are markets like insurance, credit or labour markets where this problem is not soluble and can cause market breakdowns; like the elderly not getting health insurance, the small businesses having credit restrictions, or minorities suffering job discrimination (Akerlof, 2001).

Asymmetric Information Description *

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Business Evidence

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Examples of Asymmetric Information *

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Business Application

Asymmetric Information Implementation *

Success Factors of Asymmetric Information *

Measures of Asymmetric Information *

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Professional Tools

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Further Reading

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Asymmetric Information References (4 of up to 20) *

  • Akerlof, G.A., 2001. George A. Akerlof - Prize Lecture., Available at: [Accessed on 2 November 2011].
  • Barath, S.T., Pasquariello, P., Wu, G., 2009. Does Asymmetric Information Drive Capital Structure Decisions?. The Review of Financial Studies, 22(8), pp.3211-3243.
  • Berger, A.N., Espinosa-Vega, M.A., Frame, W.S., Miller, N.H., 2005. Debt Maturity, Risk and Asymmetric Information. International Monetary Fund Working Paper WP/05/201.
  • Einav, L., Finkelstein, A., Schrimpf, P., 2007. The Welfare Cost of Asymmetric Information: Evidence from the U.K. Annuity Market. NBER Working Paper No. 13228.

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