2.10 Market failure - asymmetric information

Objective notes

2 learning objectives

2.10.1(HL)—Asymmetric information

• Asymmetric information occurs when one side of a transaction has more or better information

• Adverse selection and moral hazard are key cases

2.10.2(HL)—Responses to asymmetric information

• Government responses include legislation, regulation, and provision of information

• Private responses include signalling and screening