The significance of asymmetric information.

• The significance of asymmetric information:

  • imperfect markets will never have perfect information , one party is more likely to have more information than the other
  • Economic agents are unable to undertake rational decision making unless they have the information required to make those decisions
  • Therefore, free markets are likely to misallocate resources
• Imperfect markets will never have what?

  perfect information
• What are economic agents unable to undertake if they do not have the information required?

  rational decision making
• What is likely to happen in free markets due to imperfect information?

  misallocation of resources