Information asymmetry means that everyone in the transaction has different information. In social, political, economic and other activities, some members possess information that other members cannot possess, thus causing information asymmetry. The following is what I have compiled about what information asymmetry is. I hope you all like it!
Possible problems caused by information asymmetry
Agent problem
Agent Not always acting in the best interests of the client. For example, managers act as agents for all shareholders, but they may not always safeguard the interests of shareholders and try to maximize their own interests when making decisions. In the principal-agent relationship, due to information asymmetry, the contract between shareholders and managers is incomplete, and they need to rely on the managers' "moral self-discipline." The goals pursued by shareholders and managers are inconsistent. Shareholders want to maximize the value of the equity they hold, while managers want to maximize their own utility. Therefore, there is moral hazard between shareholders and managers, which needs to be guided through incentive and restraint mechanisms. and limiting managers’ behavior. This is also the principle of equity incentives.
Moral hazard problem
The information asymmetry will cause both parties to the transaction to face the problem of "moral hazard" after the transaction is completed. The problem of moral hazard is a question raised when studying insurance contracts. Economists often use moral hazard to summarize people's "lazy", "free-riding" and opportunistic behavior. In the governance of listed companies, the following three situations are usually manifested: First, the loan agreement is violated and the use of funds is changed privately; second, the borrower conceals investment income and evades repayment obligations; third, the borrower is indifferent to the use efficiency of the borrowed funds and is irresponsible. Responsibility, failure to work hard, resulting in loss of borrowed funds.
Adverse selection
Asymmetric information may lead to adverse selection.
This phenomenon was first proposed by Kenneth Joseph Arrow in 1963. George Akerlof further elaborated in his famous book "The Market for Lemons" in the 1970s. Three American economists, Akerlof, Spence, and Stiglitz, won the 2001 Nobel Prize in Economics for their research on information asymmetric markets and information economics.
From an economic perspective, it means that one party to the transaction does not fully understand the other party and the two parties are in an unequal position.
An introduction to the information asymmetry theory
The information asymmetry theory means that in market economic activities, various types of personnel have different understandings of relevant information; those who have sufficient information People are often in a more advantageous position, while people with poor information are in a relatively disadvantaged position. The theory of information asymmetry was proposed by three American economists - Joseph Stiglitz, George Akerlof and Michael Spence. This theory holds that: sellers in the market know more information about goods than buyers do; the party with more information can benefit from the market by delivering reliable information to the party with poor information; the party with less information between the buyer and the seller Will try to obtain information from the other party; market signal display can make up for the problem of information asymmetry to a certain extent; information asymmetry is a shortcoming of the market economy. To reduce the harm of information asymmetry to the economy, *** should be in the market play a powerful role in the system. This theory provides explanations for many market phenomena such as the ups and downs of the stock market, employment and unemployment, credit rationing, commodity promotions, commodity market share, etc., and has become the core of modern information economics and has been widely used in everything from traditional agricultural products markets to modern financial markets and other fields.
Classification of Economic Knowledge
Hayek has divided knowledge into two categories in his article "The Utilization of Knowledge in Society": one is scientific knowledge, that is, organized knowledge Mastered by experts and available in theories and books; one is knowledge of a specific time and place, possessed by people at that time and place.
This also exists for the distribution of information at a specific time and place. The media can be regarded as a major tool for allocating information at a specific time and place, such as broadcasting, telecommunications, newspapers, etc. The media is also run by *** The problem of low efficiency in the allocation of information resources is mainly reflected in the non-market operation of information allocation, the non-commercialization of information, and the inability to meet the demand for information from economic activities. Under the conditions of market economy, economic activities have an increasing demand for information at a specific time and place. The restrictions on the main body of information resource allocation should be relaxed, private capital should be allowed to operate the media, and an information dissemination mechanism led by market individuals should be established. It will also be an inevitable trend to allocate social information resources according to economic rules.
The status of information distribution determines the status of information asymmetry and is one of the main sources of information asymmetry. Most of the existing information asymmetry is the result of system selection rather than the cause of system selection. Therefore, to solve information asymmetry, we must first focus on the information distribution system. The information industry can be divided into education, scientific research, and cultural industries that allocate scientific knowledge; and broadcasting, telecommunications, and media, including the Internet industry, that allocate information at a specific time and place. It can be divided into the tool industry for information resource allocation and the content industry for information resources. Together they form an economic system that allocates information resources. The significance of information economics lies in studying how efficiently this system performs and how it should be improved to achieve optimal efficiency.
Economic system of information resource allocation
Information resources are a scarce resource like other social wealth. The preferential possession of information resources will also bring related wealth. When a certain information resource is monopolized, the corresponding interests will also be monopolized. Patent rights are a kind of monopoly on information resources. Intel's chips - this monopoly on technological resources have allowed it to sit comfortably at the top of the pyramid of the electronic computer industry, and its value accounts for nearly half of the entire computer industry chain. When a country's economy plays a decisive role in the world, its language will also become a scarce resource, such as English. Non-English speaking countries around the world spend huge amounts of wealth every year to master this language. Advanced civilization itself is a resource of huge value, and backward areas have to spend money to buy it, such as Hollywood movies.
People now divide the economic system into three parts: logistics, capital flow and information flow. Economics currently rarely conducts systematic analysis of the interrelationships and impacts of these three areas. This can also be regarded as a new classification method for social industries, and may become the mainstream of research on social industries in the future. The current industrial classification divides industries into primary industry, secondary industry and tertiary industry, and has become the main means of studying the economic system and national economic accounting. The impact of the application of new industrial classification methods on the economic system, the impact on the allocation efficiency of economic resources, and the impact on economic policies are very worthy of in-depth study by economics.
Information has been disseminated in a certain way since its formation. We call the tools, content and methods of information dissemination the economic system of information resource allocation. This economic system can be divided into an economic system that allocates scientific knowledge, that is, systematic information. Education, science, and culture are the main tools for disseminating scientific knowledge; and an economic system that allocates information at a specific time and place. Radio, television, newspapers, and magazines. , the Internet and other media are the main tools for disseminating it. Together they form a relatively independent industry and constitute an economic system for information dissemination.
Economic system with asymmetric information
Information resources are a scarce resource like other social wealth. The preferential possession of information resources will also bring related wealth. When a certain information resource is monopolized, the corresponding interests will also be monopolized. Patent rights are a kind of monopoly on information resources. Intel's chips - this monopoly on technological resources have allowed it to sit comfortably at the top of the pyramid of the electronic computer industry, and its value accounts for nearly half of the entire computer industry chain.
When a country's economy plays a decisive role in the world, its language will also become a scarce resource, such as English. Non-English speaking countries around the world spend huge amounts of wealth every year to master this language. Advanced civilization itself is a resource of huge value, and backward areas have to spend money to buy it, such as Hollywood movies.
People now divide the economic system into three parts: logistics, capital flow and information flow. Economics currently rarely conducts systematic analysis of the interrelationships and impacts of these three areas. This can also be regarded as a new classification method for social industries, and may become the mainstream of research on social industries in the future. The current industrial classification divides industries into primary industry, secondary industry and tertiary industry, and has become the main means of studying the economic system and national economic accounting. The impact of the application of new industrial classification methods on the economic system, the impact on the allocation efficiency of economic resources, and the impact on economic policies are very worthy of in-depth study by economics.
Information has been disseminated in a certain way since its formation. We call the tools, content and methods of information dissemination the economic system of information resource allocation. This economic system can be divided into an economic system that allocates scientific knowledge, that is, systematic information. Education, science, and culture are the main tools for disseminating scientific knowledge; and an economic system that allocates information at a specific time and place. Radio, television, newspapers, and magazines. , the Internet and other media are the main tools for disseminating it. Together they form a relatively independent industry and constitute an economic system for information dissemination.
Problems caused by information asymmetry