Economics of asymmetric Information
- learn which different types of asymmetric information exist
- acquire the skills to establish ideal benchmark market outcomes under complete information
- develop the ability to compare market outcomes under asymmetric information to the ideal benchmark and to identify resulting problems
- gain insights into potential solution mechanisms
- will be able to present and discuss related theoretical models and empirical results in plenary settings.
From complex technical products to foodstuffs to consumer products such as toothpaste or strollers, sellers are often better informed about product quality than buyers. Similarly, buyers of a car insurance often know more about their driving behavior than sellers, and buyers of health insurance often know more about their health-related behavior than sellers. Unfortunately, either information asymmetry may lead to market inefficiencies. This module provides an overview of the fundamental problems (adverse selection, moral hazard) and presents potential solution mechanisms (e.g., signaling, screening). Throughout, students are encouraged to think independently and to apply their knowledge to products they own.
Prerequisites for attending
Introduction to economics and/or Microeconomics
Work Load and Credit Points
56 hours attendance time & 94 learning hours incl. exam(s) / 5 CP
- Macho-Stadler, I., Perez-Castrillo, J.D. (2005), An introduction to the economics of information: Incentives and contracts
- Mas-Colell, A., Whinston, M.D., Green, J.R. (1995), Microeconomic theory.
- Tirole, J. (2004), The theory of industrial organization.