Decisions may then be taken on the basis of a less-than-complete information set and risks may be run which in a more informed environment would have been avoided. Another frequent occurrence in financial markets is that participants have unequal access to information.
Borrowers typically are several steps ahead of lenders in knowing the probabilities of success of their projects and how gains and losses might be shared. Lenders may be unaware that the funds they provide flow to the most risky investments, or are wasted on less productive activities.