Asymmetrical Information

Discipline: Economics

Asymmetrical information exists when one side of the market possesses information lacked by others in that market.

Employers in labor markets often posses more information about the current/future status of their industry than trade unions or workers, and can use this as a basis of negotiation.

However, it can be seen as an imperfection in the working of the market mechanism and may lead to economic inefficiency.

Also see: adverse selection

Source:
G Akerlof, 'The Market for "lemons": Quality Uncertainty and the Market Mechanism', Quarterly Journal of Economics, vol. LXXXIV (August 1970), 3

Share