An asymmetric information problem arises when one party to a transaction has information that is not available to the other party, as when a corporation fails to tell investors the full extent of its losses.

Question

Quizplus · Accepted Answer

Asymmetric information occurs when one party in a transaction has more or better information than the other, leading to an imbalance that can affect decision-making and fairness in transactions, as illustrated by the example of a corporation not disclosing its losses to investors.

An Asymmetric Information Problem Arises When One Party to a Transaction