Markets
Insiders and friends of insiders who know something about how well a firm is doing before earnings are released. This is an example of information asymmetry that is detrimental to the reputation of markets such that it represents a systemic risk to economies.Contracts
Friends of government officials who know something that gives them an advantage in securing government contracts and jobs. This is known as cronyism.Paywalls
Paywalls that make it difficult to access research, news and information from the most authoritative sources. This creates a digital divide based on socioeconomic status.Professional Services
Access to professional advice such as the advice of a competent doctor or lawyer. This can be expensive creating a divide based on financial resources unless healthcare and legal aid is provided as a public service.Power Imbalance
A power imbalance such as a large firm that has 14 lawyers involved in drafting its terms of service and a consumer who has no time to read the complex agreements that they are agreeing to on a regular basis in order to secure basic services.Seller's Advantage
Generally speaking, the seller of a product, service or asset knows more about what they are selling than the buyer. For example, a person selling a home who knows that one neighbor is suspicious, mildly hostile and unfriendly.| Overview: Information Asymmetry | ||
Function | ||
Definition | Situations in which some participants have better information than others. | |
Synonyms | Dispersed knowledge | |
Related Concepts | ||
