Information asymmetry is not a problem when:
A)the wants of both parties are aligned with one another.
B)the wants of both parties are opposed to one another.
C)the constraints of both parties are identical.
D)neither party has any constraint.

Question

Quizplus · Accepted Answer

Information asymmetry occurs when one party has more information than the other in a transaction. In this case, it is not a problem when the wants of both parties are aligned with each other because there is no incentive for either party to hide information or take advantage of the other. Therefore, both parties can trust each other and make informed decisions. Option B is incorrect because in this scenario, the parties are opposing each other, which could result in one party taking advantage of the other. Option C is incorrect because even if their constraints are the same, the parties could still have different information, resulting in asymmetry. Option D is incorrect because without any constraints, one party could easily take advantage of the other.

Information Asymmetry Is Not a Problem When