Private markets sometimes deal with asymmetric information through:
A)behavioural economics
B)command and control
C)signalling and screening
D)political economy

Question

Quizplus · Accepted Answer

Signalling and screening are commonly used methods in private markets to deal with asymmetric information. Signalling involves an informed party providing a signal to the other party to demonstrate their level of knowledge or quality. For example, a worker with a high level of education may use their degree as a signal to an employer of their potential productivity. Screening involves the other party (in this case, the employer) setting criteria to screen out candidates who are likely to be of low quality or have limited information. For example, a company may use a pre-employment test to screen out candidates who lack certain skills or knowledge. These methods help to reduce the knowledge gap and increase trust between parties in private markets.

Private Markets Sometimes Deal with Asymmetric Information Through