microeconomic theory asymmetric information

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1、CHAPTERAsymmetricInformationEIGHTEENMarketsmaynotbefullyefficientwhenonesidehasinformationthattheothersidedoesnot(asymmetricinformation).Contractswithmorecomplextermsthansimpleper-unitpricesmaybeusedtohelpsolveproblemsraisedbysuchasymmetricinformation.Thetwoimportantclassesof

2、asymmetricinformationproblemsstudiedinthischapterincludemoralhazardproblems,inwhichoneparty’sactionsduringthetermofthecon-tractareunobservabletotheother,andadverseselectionproblems,inwhichapartyobtainsasymmetricinformationaboutmarketconditionsbeforesigningthecontract.Careful

3、lydesignedcontractsmayreducesuchproblemsbyprovidingincentivestorevealone’sinformationandtakeappropriateactions.Butthesecontractsseldomeliminatetheinefficienciesentirely.Surprisingly,unbridledcompetitionmayworsenprivateinforma-tionproblems,althoughacarefullydesignedauctioncanh

4、arnesscompetitiveforcestotheauctioneer’sadvantage.ComplexContractsasaResponsetoAsymmetricInformationSofar,thetransactionswehavestudiedhaveinvolvedsimplecontracts.Weassumedthatfirmsboughtinputsfromsuppliersatconstantper-unitpricesandlikewisesoldoutputtoconsumersatconstantper-u

5、nitprices.Manyreal-worldtransactionsinvolvemuchmorecomplicatedcontracts.Ratherthananhourlywage,acorporateexecutive’scompensationusuallyinvolvescomplexfeaturessuchasthegrantingofstock,stockoptions,andbonuses.Insurancepoliciesmaycaptheinsurer’sliabilityandmayrequirethecustomer

6、tobearcostsintheformofdeductiblesandcopayments.Inthischapter,wewillshowthatsuchcomplexcontractsmayariseasawayfortransactingpartiestodealwiththeproblemofasymmetricinformation.AsymmetricinformationTransactionscaninvolveaconsiderableamountofuncertainty.Thevalueofasnowshovelwill

7、dependonhowmuchsnowfallsduringthewinterseason.Thevalueofahybridcarwilldependonhowmuchgasolinepricesincreaseinthefuture.Uncertaintyneednotleadtoinefficiencywhenbothsidesofatransactionhavethesamelimitedknowledgeconcerningthefuture,butitcanleadtoinefficiencywhenonesidehasbetterin

8、formation.Thesidewithbetterinformationissaidtohaveprivateinformationor,equi