when two parties are involved in an economic transaction and one party has more information and knows much more than the other party this is considered:

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19-12-2022
Business

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when two parties are involved in an economic transaction and one party has more information and knows much more than the other party this is considered:

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Srivastava Srivastava · Answer 1 · 2022-12-22T01:30:18-05:00

When one party to a transaction has access to more information than the other, this situation is referred to as having "asymmetric information."

What is it referred to as when one side to an economic transaction has less information than the other party?

A situation when one party to an economic transaction has less information than the other party is known as asymmetric information. Adverse selection and moral hazard are two issues connected to asymmetric information. The concept known as "adverse selection" states that bad risks are more likely than good risks to purchase insurance. The importance of adverse selection is acknowledged in the life and health insurance industries. The phenomenon known as moral hazard describes how having insurance may alter one's conduct. If one had insurance, one can start acting recklessly. A situation known as "moral hazard" occurs when one party acts recklessly or fails to perform honestly because they are aware that the other party will be financially affected by their actions. When governments decide to save big businesses, moral hazard may result.

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