ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -"Asymmetric information” is a term that refers to when one party in a transaction is in possession of more information than the other. In certain transactions, sellers can take advantage of buyers because asymmetric information exists whereby the seller has more knowledge of the good being sold than the buyer.

Detailed explanation-2: -Asymmetric information in insurance refers to a market situation in which one party in a transaction has insufficient information about the other party which leads to market failure.

Detailed explanation-3: -Asymmetric information occurs when one party knows more about an economic transaction or asset than the other party does. Adverse selection occurs before a transaction takes place. If unmitigated, lenders and insurers will attract the worst risks. Moral hazard occurs after a transaction takes place.

Detailed explanation-4: -Information asymmetry is an imbalance between two negotiating parties in their knowledge of relevant factors and details. Typically, that imbalance means that the side with more information enjoys a competitive advantage over the other party.