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: -1. Why can asymmetric information between buyers and sellers lead to a market failure when a market is otherwise perfectly competitive? Asymmetric information leads to market failure because the transaction price does not reflect either the marginal benefit to the buyer or the marginal cost of the seller.

Detailed explanation-3: -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-4: -The job applicant, who fails to reveal at a job interview that they do not have a particular skill for the job. The estate agent, who exploits the fact that a potential buyer of a property has very little knowledge about the property, and any possible problems. More items •17-Jan-2020