Information Asymmetry
Monopolies of Knowledge
The study of decisions in transactions where one party has more or better information than the other. This asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst case.
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Origin
Introduced by the economist George Akerlof in his 1970 paper "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism." Akerlof used the example of the used car market, where sellers often have more information about the quality of the cars they are selling than buyers do, leading to a market where low-quality "lemons" drive out high-quality cars. The concept of information asymmetry has since become a recognized concept in economics and other fields, and has been used to describe a variety of phenomena, from financial markets to healthcare. It has also led to the development of strategies to address or mitigate the effects of information asymmetry, such as disclosure requirements, reputation systems, and certification programs.