" For 10 points, name this situation in which one party to a transaction knows more than the other.
An attempt to reduce this state may produce the "sheepskin effect," or result in "separating" and "pooling" equilibria. Employees acquiring education has often been studied as a way of remedying this situation similar to a warranty. A form of this situation was first named to describe how highÂ­risk customers drive up the cost of insurance. In that form of this situation, the equilibrium price is too low for producers to sell highÂ­quality goods, so low quality goods dominate. Ways out of this situation include (*) screening and signalling, whichwere studied by Joseph Stiglitz and Michael Spence. This situation's special case of adverse selection was explored by George Akerlof in "The Market for Lemons." For 10 points, name this situation in which one party to a transaction knows more than the other.
An attempt to reduce this state may produce the "sheepskin effect," or result in "separating" and "pooling" equilibria.
information asymmetry [or asymmetric information; prompt on "imperfect information"; accept moral hazard; accept adverse selection until it is read]