Symmetric & Asymmetric Information – AS/A LEVELS/IB/IAL

Symmetric & Asymmetric Information – AS/A LEVELS/IB/IAL

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Symmetric & Asymmetric information

Symmetric Information

This occurs when the buyer and seller have the same information.

Asymmetric Information

This occurs when the buyer or seller has more information than the other.

Examples of Asymmetric Information

Second hand car sales

This occurs because the second hand car salesman knows more about any problems the car might have than the potential customer. This is also known as the lemon market.

Insurance

Customers may withhold information about themselves from the insurance company to ensure they are not deemed to be a risky customer.

Mortgages

Banks might know the client is at a high risk of defaulting on their mortgage before selling to them.

Tushar Depala

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