Which of the following relationships involves asymmetric information?
A)A potential employee knows more about his skills and motivations than potential employers.
B)The seller of a used car knows of mechanical problems that aren't easy for the average buyer to observe.
C)A real estate agent knows the lowest price a seller is willing to sell her house for, but does not reveal it to people he shows the house.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

All three scenarios involve situations where one party has more information than the other, creating asymmetric information. In option A, the potential employee has better information about their skills and motivation than potential employers. In option B, the seller of a used car has better information about the condition and history of the car than the average buyer. And in option C, the real estate agent has inside knowledge about the seller's willingness to sell at a lower price, but does not disclose this to potential buyers.

Which of the Following Relationships Involves Asymmetric Information