asymmetric information

A mismatch of the depth and quality of information between two or more parties to a transaction or Contractual arrangement. A classic example of asymmetric information frequently discussed in economic literature is that found in markets for secondhand automobiles. The purchaser of a used car is normally at a significant information disadvantage in comparison to the seller. The concept of *caveat emptor is of particular relevance in such circumstances. Between a *principal and an *agent, *agency costs can be exacerbated by asymmetries of information, as an agent may be tempted to exploit detailed knowledge of a transaction or organization to the disadvantage of a principal.

Auditor's dictionary. 2014.

Look at other dictionaries:

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