Asymmetric Information And Market Outcomes - amazonia.fiocruz.br

Asymmetric Information And Market Outcomes - that would

In contract theory and economics , information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This asymmetry creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection , [1] moral hazard , and monopolies of knowledge. Information asymmetry extends to non-economic behavior. As private firms have better information than regulators about the actions that they would take in the absence of a regulation, the effectiveness of a regulation may be undermined. Asymmetric Information And Market Outcomes.

Asymmetric Information And Market Outcomes Video

Asymmetric Information

Can we say like Akerlof that low-quality mutual funds would drive high-quality mutual funds out of the market? If all investors perceive mutual funds as homogeneous management services, the market is not sustainable.

If all investors consider that they are differentiated in quality, the mutual funds set the same price and coexist on the same market. We infer from the model its available levers to foster the existence this market in a dynamic context.

AbstractThe literature is still divided about the information asymmetry problems of actively managed mutual funds. This disagreement raises an issue about the conditions behind the existence of this market.

Essay on Asymmetric Information

Some authors support the existence of market clearing mechanisms, while others estimate that passive funds are a substitute for active funds and the higher fees charged for the latter are not justified. We contribute to this discussion by formalizing these two approaches in price-setting strategies in two subgames.

We find that, owing to the actions of the external body and the presence of sophisticated investors and a low-quality mutual fund, there are incentives to deliver high-quality service and the active mutual fund market is preserved.]