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Information Asymmetry: When Markets Fail

In: Managing Complexity in Social Systems

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  • Christoph E. Mandl

    (University of Vienna)

Abstract

What happens in a market when buyers expect a certain product quality only to find out after the purchase that the sellers misinformed them? This question is first addressed in the context of used cars. However, this dynamicDynamics is not confined to the used car market but may emerge in any market with asymmetrical information. The most disastrous example in this century is the financial crisisFinancial crisis of 2007–2008. In markets with asymmetrical informationAsymmetrical information and delay, some sellers may be tempted to sell an inferior product until the market collapsesMarket collapse. If potential buyers react strongly when it becomes evident that some products are of poor quality, then even one sellerSellers may cause a market to collapseCollapse.

Suggested Citation

  • Christoph E. Mandl, 2023. "Information Asymmetry: When Markets Fail," Management for Professionals, in: Managing Complexity in Social Systems, edition 2, chapter 0, pages 183-188, Springer.
    • Handle: RePEc:spr:mgmchp:978-3-031-30222-0_18
    DOI: 10.1007/978-3-031-30222-0_18
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