Information asymmetry is the situation in which the agent has access to information not available to the principal.

Question

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Information asymmetry occurs when one party has more information than the other, which can create imbalances in power or lead to adverse selection or moral hazard problems. In this case, the agent has access to information not available to the principal, creating a situation of information asymmetry.

Information Asymmetry Is the Situation in Which the Agent Has