Asymmetric Information

Imbalanced Information, Information Asymmetry

n.

Pronunciation

/eɪ.sɪˈmɛtɹɪk ˌɪnfərˈmeɪʃən/

Definition

Asymmetrical Information occurs whenever one party has information more superior or more complete than the other.

In business, asymmetrical information can lead to the seller having more information than the buyer or vice versa. If the imbalance is severe, one party might unknowingly make less profit, take on more risk, or end up with an undesirable product or service. The imbalance of information may also embolden the buyer or seller to be dishonest about some aspect of the transaction, causing a condition of “moral hazard” because a party may be acting in bad faith. Some form of information asymmetry is present in almost all business transactions. Asymmetrical information often occurs when the subject is complex or the facts themselves are difficult to obtain. Specialists are often hired to correct asymmetrical information by providing their own resources and wealth of knowledge to a business or consumer.

Category

Related Terms

B2C

Product Information Encyclopedia

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