asymmetric information

Meaning

This term refers to a situation in business or economics where one party in a transaction has more or better information than the other. This imbalance can lead to market inefficiencies or unfair advantages, particularly in industries like insurance, finance, and used car sales. The tone is formal and academic, commonly used in economic analyses and strategic business discussions.

Examples

• The used car market is a classic example of asymmetric information, as the seller knows much more about the vehicle's condition than the buyer.

  The used car market is a classic example of asymmetric information, as the seller knows much more about the vehicle's condition than the buyer.

• To mitigate the risks of asymmetric information, insurance companies require detailed medical histories from applicants.

  To mitigate the risks of asymmetric information, insurance companies require detailed medical histories from applicants.

• Asymmetric information between corporate insiders and public investors can lead to insider trading if left unregulated.

  Asymmetric information between corporate insiders and public investors can lead to insider trading if left unregulated.

• The consulting firm was hired to bridge the gap of asymmetric information between the two merging companies.

  The consulting firm was hired to bridge the gap of asymmetric information between the two merging companies.

• Online reviews help reduce asymmetric information by giving consumers access to real user experiences before purchasing.

  Online reviews help reduce asymmetric information by giving consumers access to real user experiences before purchasing.

Common Mistakes

• ✗ There is an asymmetrical information between us.

  ✓ There is asymmetric information between us.

  While 'asymmetrical' is an adjective, the standard economic and business term is 'asymmetric information'. Additionally, 'information' is uncountable, so using the indefinite article 'an' is incorrect here.

• ✗ We suffer from asymmetric informations.

  ✓ We suffer from asymmetric information.

  'Information' is an uncountable noun in English and cannot be pluralized with an 's'.

Related Expressions

Practice

• In the insurance industry, ___ can lead to high-risk individuals buying more coverage than low-risk ones.

  💡 One party knowing more than the other in a transaction.

  Show answer

  asymmetric information

• The main goal of due diligence is to eliminate ___ before signing the acquisition contract.

  💡 The imbalance of knowledge between buyer and seller.

  Show answer

  asymmetric information