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SYMMETRIC INFO
occurs where buyers and sellers have potential access to
the same info- perfect info
but many decisions are based on imperfect info and so economic agents are unable to make an informed decision- they suffer from an information gap
ASYMMETRIC INFO
when one party has superior knowledge compared to
another
Usually, the seller has more information than the buyer and this means they can take advantage of the other party's lack of knowledge
ADVERTISING
Most advertising leads to information gaps as it is designed to change attitudes of the consumers to encourage them to buy the good
could cause them to think the benefits are greater than they actually are
TECHNOLOGY
Increases in technology mean information gaps are on the decline as people can get more information
MARKET FAILURE
Info gaps lead to market failure as there’s a misallocation of resources because people do not buy things that maximise their welfare
It means that consumer demand for a good or producer supply of a good may be too high or too low, and thus price and quantity are not at the social optimum position
Economic agents are unable to make rational decisions due to the information gap
INFO GAPS- EXAMPLES
drugs- where users do not see the long term problems
pensions- where young people do not see the long term benefits of paying into their pension scheme
financial services- where the suppliers have more info than the consumers so abuse their customers for their own benefit (moral hazard)
