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Asymmetric information in case of decision under risk

Author

Listed:
  • Constantin Anghelache

    (Bucharest University of Economic Studies, “Artifex” University of Bucharest)

  • Bodo Gyorgy

    (Bucharest University of Economic Studies)

  • Andreea Ioana Marinescu

    (Bucharest University of Economic Studies)

Abstract

The differentiated access level to the information is one of the key issue in the decision making process under risk. Typical cases with asymmetry of information are: the sale-purchase of goods, the insurance market (auto, health, life), the financial sector (loan contract), the labour market and others. Information asymmetry is considered the source of economic inefficiency, and therefore is more focus is put on the study of its effect. In this paper we analysed different aspects related to the information asymmetry, such as the adverse selection, the moral hazard, the principal-agent problem. Also we studied various involvement of the parties in each situation by analysing particular scenarios, and try to build simple models which illustrates the essence and the implication of the information asymmetry on the decision making process. Finally, we tried to identify optimal solutions where both involved party would have higher benefits, and also their expected behaviour to reach that state.

Suggested Citation

  • Constantin Anghelache & Bodo Gyorgy & Andreea Ioana Marinescu, 2017. "Asymmetric information in case of decision under risk," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(1), pages 22-36, January.
  • Handle: RePEc:rsr:supplm:v:65:y:2017:i:1:p:22-36
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    References listed on IDEAS

    as
    1. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
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    Cited by:

    1. repec:hur:ijaraf:v:8:y:2018:i:1:p:153-160 is not listed on IDEAS
    2. repec:rsr:supplm:v:65:y:2017:i:11:p:72-78 is not listed on IDEAS
    3. repec:hur:ijaraf:v:8:y:2018:i:1:p:143-152 is not listed on IDEAS
    4. repec:rsr:supplm:v:65:y:2017:i:6:p:40-50 is not listed on IDEAS
    5. repec:rsr:supplm:v:65:y:2017:i:5:p:221-229 is not listed on IDEAS

    More about this item

    Keywords

    Information asymmetry; risk; decision making; insurance; adverse selection; moral hazard; principal-agent problem; expected utility;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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