CHAPTER 19 INFORMATION GAPS Flashcards
Aysmmetric information
Where buyers and sellers have different amounts of information, with one group having more information than the other
Imperfect information or imperfect market information
Where buyers or sellers or both lack information to make an informed decision
Information failure or information gap
Where buyers or sellers or both don’t have the information that is available to make a decision
Moral Hazard
When an economic agent makes a decision in their own best interest knowing that there are potential adverse risks, and that is problems result, the cost will be partly borne by other economic agents.
Principal-agent problem
Occurs when the goals of principals, those standing to gain or lose from a decision, are different from agents, those making decisions on half of the principal. Examples include shareholders(principals) and managers (agents), or children (principals) and parents(agents)
