Presented in a conceptual framework for thinking about markets by asymmetric information. Sets the standard economic analysis of the “lemons problem”, and shows how asymmetric information can lead to inefficiencies and alter the distribution of surplus. Then discussed the potential to overcome these problems through credible signals of quality, using the example of education as a signal in the labor market. Finally, briefly discussed the incentives of the company … Read more »

Presented in a conceptual framework for thinking about markets by asymmetric information. Sets the standard economic analysis of the “lemons problem”, and shows how asymmetric information can lead to inefficiencies and alter the distribution of surplus. Then discussed the potential to overcome these problems through credible signals of quality, using the example of education as a signal in the labor market. Finally briefly discussed to address the incentives of companies on the screen to the consumer to price discriminate or particularly profitable consumer groups.
«Hide

from
Kenneth Corts
7 pages.
Release Date: 27 March 1997. Prod #: 797100-PDF-ENG
Asymmetric information: market failure and market distortions Market Solutions HBR case solution

[related_post themes="flat"]