How does asymmetric information affect a contract?
If one party to an agreement holds information that the other does not, the difference can affect both of their incentives and behaviors. Due to the problem of asymmetric information the economic value a contract could potentially create may be diminished if the uninformed party cannot easily learn or verify important information, or if the informed party cannot credibly convey it.
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If a product constitutes a large portion of a consumer’s income, demand will be more inelastic.
Answer the following statement true (T) or false (F)
A long contract requires that the investor
A) sell securities in the future. B) buy securities in the future. C) hedge in the future. D) close out his position in the future.
Which of the following would most likely cause a decrease in the current demand for a normal good? a. An increase in the price of the good
b. An increase in the expected future price of the good. c. A decrease in the price of a complement for the good. d. None of the above would be likely to cause a decrease in current demand for a normal good.
In the same city, one job currently pays $6 more per hour than another job. The two jobs have equivalent training requirements, but labor is not migrating toward the higher-paying occupation. Both markets are perfectly competitive. Which of the following conclusions is correct?
a. The lower-paying occupation has less attractive nonmonetary characteristics. b. There are barriers to entry into the higher-paying occupation. c. The higher-paying occupation has a dominant labor union. d. There are barriers to entry into the lower-paying occupation. e. The higher-paying occupation has less attractive nonmonetary characteristics.