Technology Terms Glossary
What is informational asymmetry?
This happens when information relating to a particular transaction, such as the purchase of property, is disproportionately possessed by two parties. In other words, one party to the transaction has relevant or more information that isn’t known by the other party.
In many transactions, one party, such as the buyer, has access to better or more information than the other party. This results in a phenomenon called informational asymmetry. This usually occurs when a seller of a good has greater knowledge compared to the buyer.
Elements
Informational asymmetry can affect business transactions in many ways, such as:
- Example 1: Adverse selection
- Example 2: Monopoly of knowledge
Here is a comprehensive article about informational asymmetry .
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