Screening and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through screening. Screening is a strategy one uses when they don't have information. A screen can be any indicator that lets the screener know if the good or service is reliable and will meet the screener's wants.
Screening and Imperfect Information Asymmetric information refers to a market where one side (either the buyer or the seller, but usually the buyer) has less information than the other side of the market. When there is asymmetric information in a market, markets are inefficient because the side with less information doesn't want to take the risk involved in buying (or selling) the good or service. One method of solving this problem is through screening. Screening is a strategy one uses when they don't have information. A screen can be any indicator that lets the screener know if the good or service is reliable and will meet the screener's wants.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter16: Information, Risk, And Insurance
Section: Chapter Questions
Problem 20CTQ: A website offers a place for people to buy and sell emeralds, but information about emeralds can be...
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![Screening and Imperfect Information
Asymmetric information refers to a market where one side (either the buyer or the
seller, but usually the buyer) has less information than the other side of the
market. When there is asymmetric information in a market, markets are inefficient
because the side with less information doesn't want to take the risk involved in
buying (or selling) the good or service.
One method of solving this problem is through screening. Screening is a strategy
one uses when they don't have information. A screen can be any indicator that
lets the screener know if the good or service is reliable and will meet the
screener's wants.
• Offer an example of when you used screening to solve a lack of
information. What kind of screen did you use?
• Was the screen effective? Were you happy with the result?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9518ead2-7807-407a-83c1-4bfc8c217554%2F6b702a0a-421a-477b-9d78-ee9f418dd5ed%2F26hf3zm_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Screening and Imperfect Information
Asymmetric information refers to a market where one side (either the buyer or the
seller, but usually the buyer) has less information than the other side of the
market. When there is asymmetric information in a market, markets are inefficient
because the side with less information doesn't want to take the risk involved in
buying (or selling) the good or service.
One method of solving this problem is through screening. Screening is a strategy
one uses when they don't have information. A screen can be any indicator that
lets the screener know if the good or service is reliable and will meet the
screener's wants.
• Offer an example of when you used screening to solve a lack of
information. What kind of screen did you use?
• Was the screen effective? Were you happy with the result?
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