ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Asymmetric information exists when in a two-party trade one party has greater information than the other party.It leads to market failure with one reaching an inefficient allocation of resources. Such an inefficient solution results due to adverse selection that arises when there exist asymmetric information.

Detailed explanation-2: -Asymmetric information, also known as “information failure, ” occurs when one party to an economic transaction possesses greater material knowledge than the other party.

Detailed explanation-3: -Asymmetric information is otherwise called information failure or imbalance of information. It is often common in transactions between buyers and sellers where the seller has higher information or knowledge about the product than the buyer.

Detailed explanation-4: -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. The problem of asymmetric information is common to all insurance markets.

Detailed explanation-5: -The main types of market failure include asymmetric information, concentrated market power, public goods and externalities.