Questions tagged [asymmetric-information]
The asymmetric-information tag has no usage guidance.
-1
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0answers
24 views
Does the efficient market hypothesis create the following paradox?
The efficient market hypothesis states that it's impossible to beat the market because the market is most likely more rational, and more knowledgeable, than you are. This creates a problem for someone ...
3
votes
1answer
122 views
Market for lemons derivation
Akerlof's 1970 paper models the utility of two trading groups as
$$
U_1 = M + \sum_{i=1}^n x_i \\
U_2 = M + \sum_{i=1}^n \frac{3}{2} x_i
$$
where $M$ is the consumption of good other than cars, $x_i$ ...
2
votes
1answer
78 views
Asymmetric information assumption
This question isn't about asymmetric information per se but rather one of the assumptions. Consider a market for second hand cars; there are lemons (low-quality cars) and plums (high-quality cars).
...
0
votes
0answers
79 views
Why the market clearing process depends on assumption of perfect and costless information?
Can anyone give me an intuitive explanation why it is often argued that market cannot clear (i.e. supply and demand of something does not match and there is no equilibrium, so the market gets mired in ...
0
votes
0answers
90 views
What is the difference between the leader and the follower in Stackelberg's model of duopoly?
There is explanation that I was given (maybe I misunderstood it), but it doesn't look plausible:
The difference is asymmetrical information, namely that one firm knows the reaction function of its ...
0
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0answers
19 views
Unemployment Insurance: Comparing Effort Levels in NUI, FB, and SB
Given an agent that is maximizing:
$\mathop{\max}\limits_e$ $eu(w-\tau)+(1-e)u(b)-\psi(e)$
Where $e\in[0,1]$ is the probability of being employed given som effort level. $\psi(e)$ is convex and $u(\...
0
votes
3answers
101 views
Looking for a term that explains market participants that lie about their participation to gain access to said market
I'm Looking for a term that explains the behavior of a market participants that will lie or exaggerate how much or what they offer in order to gain access to a market that would otherwise be ...
3
votes
0answers
38 views
Common knowledge in model formulation and solution
Economics models usually assume that the structure of the economy is common knowledge among agents.
Mathematically, an event is common knowledge if it lies in the meet of all agents' information ...
2
votes
1answer
276 views
Recent economics theories that involve differential topology?
The original development of general equilibrium theories involved differential topology.
I wonder if there are any recently developed theories, in any field of economic theories, that utilize ...
1
vote
1answer
58 views
What is one dimensional, ordered type?
I am reading papers about moral hazard. What is one dimensional, ordered type $\theta\in\Theta$?
What is one dimensional, not ordered type $\theta\in\Theta$?
Could you please give an example?
...
1
vote
2answers
60 views
Literature request: Any articles on the signalling theory / game theory / asymmetric information of the firms' recruiting process?
I'd like to read more about the recruiting process of firms. Signalling theory and game theory can be a useful tool to better understand this phenomena.
For example:
Applicants, who ask for higher ...
0
votes
1answer
85 views
What are some applications of Akerlof's 'lemons' in goods and services markets?
How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?
1
vote
1answer
110 views
Can lying be disincentivized without serious curtailments of free speech?
In the new age of Alternate Facts, one might argue that many actors personally benefit hugely from lying, at the expense of other sectors of society.
Economically speaking you might argue that this is ...
5
votes
1answer
272 views
Equilibria in Signaling and Screening
I am now studying the Spence's job market model using both signaling and screening.
It turns out that, when a worker's reservation value = 0 (she can get 0 if she does not get employed), then both ...
2
votes
1answer
129 views
Moral hazard with linear effort and two possible outcomes
Suppose you have a risk averse principal and a risk averse agent with utility functions $v(q_i - w_i)$ and $u(w_i)$, respectively, where $i = \{H,L\}$, and $q$ is output and $w$ is the wage. The ...
2
votes
1answer
195 views
difference between screening game and moral hazard game
What is the difference between screening game and moral hazard game?
I know that in screening game, TYPE is not known by the principal, while in moral hazard game, EFFORT is not observed by the ...
8
votes
0answers
255 views
LEN-Model equivalency
Starting position is a principal-agent-model with incomplete information (moral hazard) and the following properties:
Agent utility: $u(z)=-e^{(-r_az)}$
Principal utility: $B(z)=-e^{(-r_pz)}$
Effort ...
0
votes
0answers
236 views
How does Joseph Stiglitz and Greenwald explain why markets with imperfect information fail to have a pareto efficient equilibrium?
How does Joseph Stiglitz and Greenwald explain why markets with imperfect information fail to have a pareto efficient equilibrium? What premises do they use to come to that conclusion?
For example, ...
5
votes
1answer
59 views
Evidence that open source production processes increase efficiency and/or consumer surplus?
Is there peer reviewed evidence that open source production processes increase efficiency and/or consumer surplus? It seems that the first theorem of welfare economics requires complete markets which ...
1
vote
0answers
322 views
Which economic game theory model is most similar to poker?
Propeties the model should have:
Well motivated: the game is actually is a plausible model of a real world situation. Maybe with some parameters learnt from data.
Complete: it is a complete game ...
6
votes
3answers
128 views
Is there an economic reason why employees don't share salary information with each other?
In Western society, one's salary is often a taboo topic and people tend to not tell other people what they earn.
In China by contrast, I have been told that asking one's salary is fairly normal ...
1
vote
1answer
76 views
Is the lack of information on customer behaviour good for banks?
Discussing chapter 18 on Microeconomic Theory Basic Principles and Extensions - Nicholson and Snyder book - regarding Asymmetric information a student raise an interesting point of view regarding the ...
2
votes
3answers
824 views
Does the demand for bad quality products increase when there is information asymmetry?
Situation 1 In a situation where we have two markets one with good quality products and the other with bad quality products, if we are in a situation where the buyer knows which is the good product ...
4
votes
1answer
87 views
What is the classic paper that derives borrowing constraints from asymmetric information?
In reading the Wikipedia article about the "financial accelerator," I read this
Firms’ ability to borrow depends essentially on the market value of
their net worth. The reason for this is the ...
5
votes
1answer
368 views
Moral Hazard or Adverse Selection?
I pay the doctor before he conducts the surgery.
Can anyone explain to me whether this statement shows moral hazard or adverse selection?
3
votes
2answers
80 views
Derivation on p.99 of Salanie, The Economics of Taxation (2nd edition)
Starting on p. 98 of Salanie's "The Economic of Taxation" (2nd edition), it explains
To probe it more rigorously, let us define the utility of taxpayer $w$ when he claims to have productivity $w'$:
...
5
votes
4answers
473 views
The Backward Bending Supply Curve, Asymmetric Information, and Monopoly
This recent question about when monopoly is undesirable made me curious about when monopoly is actually desirable? I was reminded of an argument for the efficiency of monopolies when moral hazard ...
