What is the market response to asymmetric information?

Asymmetric information is a problem in many markets, such as the used car market, the insurance markets, and the credit markets. Choose one of these three markets, and using some of the concepts you learned from this module, discuss the questions below:

  • What is the market response to asymmetric information? (Hint: Does Coca-Cola have an asymmetric information problem?).
  • What is the market response to adverse selection? (Hint: When you purchased life insurance, did you have to take a physical exam?).
  • What is the market response to moral hazard? (Hint:  Remember last time you saw a doctor you had to pay a  $30 deductible?).
  • Do you think that education is a “market signal” that can help companies make better economic decisions when asymmetric information exists?
  • What would be the market response if there was perfect information?

Assignment Expectations

In Module 4 Case Assignment, you are expected to:

  • Describe the purpose of the paper and provide a conclusion.
  • Present information in a professional manner.
  • Answer the Case Assignment question clearly and provide necessary details.
  • Write clearly and correctly—that is, no poor sentence structure, no spelling and grammar mistakes, and no run-on sentences.
  • Provide citations to support your argument and place references on a separate page. (All the sources that you listed in the references section must be cited in the paper.) Use APA format to provide citations and references [http://owl.english.purdue.edu/owl/resource/560/01/].
  • Type and double-space the paper.
  • Whenever appropriate, please use Excel to show supporting computations in an appendix, present economic information in tables, and use the data to answer follow-up questions.
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