Which of the following is a case of asymmetric information:
A) The buyer and seller of a used car donâ€™t know how long the car will operate.
B) A provider of health insurance does not know whether a specific client is a smoker or not.
C) Neither you nor the insurance company has perfect information about whether a flood will occur.
D) None of the above are examples of asymmetric information.

Question

Quizplus · Accepted Answer

Asymmetric information occurs when one party has more or better information than the other. In option B, the health insurance provider lacks information about whether a client is a smoker, which is crucial for assessing risk and pricing insurance.

Which of the Following Is a Case of Asymmetric Information