◆ MARKET FAILURES & POLICY
Information Economics
Asymmetric information, adverse selection, moral hazard, signaling, and the principal-agent problem.
8 articles
FeaturedMoral Hazard: Why Being Protected Changes How Carefully You Behave
When someone is shielded from the cost of a bad outcome, their behavior shifts. That quiet change shapes insurance pricing, bank regulation, and policy design.
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4 articles
◆ INFORMATION ECONOMICS
What Is Asymmetric Information? The Economics of Knowing More Than the Other Side
Asymmetric information is when one side of a deal knows more than the other. It shapes insurance, used cars, hiring, and lending, and can break markets.
◆ INFORMATION ECONOMICS
The Market for Lemons: How Information Gaps Kill Good Markets
Akerlof's 1970 Nobel-winning insight: when buyers can't tell good from bad, average pricing drives quality out until only the lemons remain.
◆ INFORMATION ECONOMICS
Signaling and Screening: How Markets Close the Information Gap
When one side of a deal knows more than the other, markets have two tools: signaling (the informed party acts) and screening (the uninformed party designs).
◆ INFORMATION ECONOMICS
The Principal-Agent Problem: When the Person You Hired Has Different Goals
The principal-agent problem arises when you hire someone to act for you but cannot fully observe what they do — and their interests don't match yours.