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Asymmetric Information
N/a
10
Economics
Undergraduate 1
10/08/2010

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Cards

Term
Full Information
Definition
Buyers know quality of what they're buying. Competition unblocked ,transactions voluntary
Term
Lemons Model
Definition
Buyers don't have all the information about what they're buying, run risk of getting played
Term
Adverse Selection
Definition
Highest quality product isnt for sale because of unverifiable information in the market place. Buyers cant be sure of quality so they settle for lower priced version. Can be so severe markets break down entirely.
Term
Markets with Adverse selection
Definition
Used cars, college admissions, real estate, health care and health insurance
Term
Moral Hazard
Definition
Example; All car owners say their car is in good shape, possibly isnt. Doctors may suggest care that may not be necessary.
Term
Signals and screening behavior
Definition
Ways to provide information for buyers to see if information they were supplied is somewhat verifiable
Term
Examples of signals and screening behavior
Definition
taking car to mechanic, health exams before providing insurance, credit checks before loans
Term
Pricing Power
Definition
The ability to set prices well above cost of production. "Monopolies". Key is to limit competition.
Term
1st Degree Price Discrimination
Definition
Charge each person a different price, specifically the highest someone is willing to pay
Term
2nd degree price discrimination
Definition
Charge a different price for different quantities sold
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