Mr. Smith, who knows the proposed site of a major new highway from reading the newspaper, buys a ranch from Mr. Jones, who never reads the newspapers. This is an example of:

Question

Clayton Romero

Social Studies

30 September, 14:51

Mr. Smith, who knows the proposed site of a major new highway from reading the newspaper, buys a ranch from Mr. Jones, who never reads the newspapers. This is an example of:

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Answers (1)

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Jordyn · Answer 1

Asymmetric information

Explanation:

The above case is a case of asymmetric information in the market. The person reading the newspaper have more information about the property. Whereas the person who would sell his ranch to Mr. Smith is the person not reading the news paper and not having any information.

Asymmetric information is also called information failure because one party in economic transaction has more information than the other.