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George Akerlof
George Akerlof is a Nobel Prize-winning economist who, in 1970, first formally analyzed the market problems caused by asymmetric information. His foundational paper on the 'market for lemons,' which explores adverse selection, was initially rejected by academic journals as being either trivial or incorrect before its significance was recognized. Akerlof was awarded the Nobel Prize in 2001 for his contributions to this area of economics.
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Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Information Asymmetry within a Firm's Hierarchy
Asymmetric Information in Principal-Agent Problems
The Problem of Incomplete Contracts
George Akerlof
Inadequate Property Rights as a Cause of Externalities
Informational Barriers to Government Intervention on Externalities
Adverse Selection vs. Moral Hazard
Hidden Attributes
Hidden Actions
Signalling (Economics)
Screening (Economics)
Signalling (Economics)
Screening (Economics)
Imperfect Information and Price Dispersion Online
Pareto Inefficiency from Asymmetric Information
Missing Market (Definition)
Verifiable Information (Definition)
Health Insurance Market Scenario
Match each scenario with the specific type of information problem it best illustrates.
Analyzing Interest Rate Policy and Inequality
A software company hires a freelance developer on a fixed-fee contract for a six-month project. After the contract is signed, the company cannot perfectly monitor the developer's daily effort. The developer, knowing their work is not closely observed, puts in less effort than promised, leading to a lower-quality final product. Which economic problem does this situation best illustrate?
Comparing Market Problems from Information Imbalances
Analyzing Information Imbalance in a Service Market
Explaining Equilibrium with Mixed Motivations
The problem of moral hazard arises primarily because one party in a transaction has private, pre-contractual information about the hidden characteristics of a good or service, which the other party cannot observe.
A skilled artisan produces handcrafted wooden chairs of exceptional durability, a quality that is not apparent from a visual inspection. Potential buyers are hesitant to pay the high price the artisan asks because they cannot distinguish these chairs from visually similar, but less durable, mass-produced alternatives. Which of the following strategies would be most effective for the artisan to overcome this information imbalance and justify the premium price?
Evaluating the Severity of Market Failure from Information Imbalances