Asymmetry in Economics

Asymmetry in economics refers to situations where one party in a transaction has more or better information than the other. This can lead to imbalances in decision-making, affecting market outcomes. For example, in a used car sale, the seller may know about hidden defects that the buyer does not, which can result in the buyer overpaying. Such imbalances can cause inefficiencies in the market, as they may lead to adverse selection or moral hazard, ultimately distorting competition and trust in economic activities. Understanding asymmetry helps in designing policies to promote fairness and better functioning markets.