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Information Asymmetry
When difference in knowledge is relevant to an interaction
Hidden Action
Actions taken by one side of the economic relationship that the other side cannot observe
Hidden Characteristic
Things that one side of a transaction knows about itself that the other side does not
Moral Hazard
When a particular party has incentive to take on risks because they do not bear the costs of such risky actions
Agent
A person who performs an action for the principal
Principal
The person on whose behalf and subject to whose control an agent acts
Adverse Selection
When one party in a transaction knows more about the attributes of the item being exchanged than the other
Signaling
An action taken by an informed party to reveal private information to an uninformed party
Screening
An action taken by an uninformed party to reveal information to the informed party
Note 
Flashcard (127)