Publications
Publications
- March 1997
- HBS Case Collection
Asymmetric Information: Market Failures, Market Distortions, and Market Solutions
Abstract
Presents a conceptual framework for thinking about markets characterized by asymmetric information. Presents the standard economic analysis of "the lemons problem," and demonstrates how asymmetric information may lead to market inefficiencies and alter the distribution of surplus. Then discusses the potential to overcome these problems through credible signals of quality, illustrated by the example of education as a signal in labor markets. Concludes by briefly discussing the incentives of firms to screen consumers in order to price discriminate or to target particularly profitable consumer groups.
Keywords
Citation
Corts, Kenneth S. "Asymmetric Information: Market Failures, Market Distortions, and Market Solutions." Harvard Business School Background Note 797-100, March 1997.