Information Asymmetric

Information asymmetry occurs when one party in a transaction has more or better information than the other, leading to an imbalance. For example, a seller might know about a hidden defect in a product, but the buyer does not. This imbalance can influence decision-making, often resulting in inefficiencies or unfair outcomes. It is common in markets like used cars or insurance, where the party with more knowledge can benefit at the expense of the less-informed party. Addressing information asymmetry involves transparency, disclosures, or regulations to ensure both sides have adequate information for informed decisions.