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Asymmetric information in case of decision under risk

Constantin Anghelache, Bodo Gyorgy and Andreea Ioana Marinescu
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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

Romanian Statistical Review Supplement, 2017, vol. 65, issue 1, 22-36

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.

Keywords: Information asymmetry; risk; decision making; insurance; adverse selection; moral hazard; principal-agent problem; expected utility (search for similar items in EconPapers)
JEL-codes: D80 D82 (search for similar items in EconPapers)
Date: 2017
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