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Information asymmetry is in contrast to perfect information, which is a key assumption in neo-classical economics. [ 11 ] In 1996, a Nobel Memorial Prize in Economics was awarded to James A. Mirrlees and William Vickrey for their "fundamental contributions to the economic theory of incentives under asymmetric information". [ 12 ]
The Market for 'Lemons': Quality Uncertainty and the Market Mechanism" [1] is a widely cited seminal paper in the field of economics which explores the concept of asymmetric information in markets. The paper was written in 1970 by George Akerlof and published in the Quarterly Journal of Economics .
Signalling started with the idea of asymmetric information (a deviation from perfect information), which relates to the fact that, in some economic transactions, inequalities exist in the normal market for the exchange of goods and services.
In economics, insurance, and risk management, adverse selection is a market situation where asymmetric information results in a party taking advantage of undisclosed information to benefit more from a contract or trade.
Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions. [1] One application considers information embodied in certain types of commodities that are "expensive to produce but cheap to reproduce."
Screening techniques are employed within the labour market during the hiring and recruitment stage of a job application process. In brief, the hiring party (agent with less information) attempts to reveal more about the characteristics of potential job candidates (agents with more information) so as to make the most optimal choice in recruiting a worker for the role.
Asymmetric information is included in the JEL classification codes as JEL: D82 Wikimedia Commons has media related to Asymmetric information . The main article for this category is Information asymmetry .
From an economic perspective, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of information asymmetry. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as law and economics. One prominent application of it ...