Asymmetry of information

Asymmetry of information means that one party to a transaction or a relationship has a larger amount of relevant information available to them, than the other party.

One example is a hostile takeover bid, where the management of the target company will always have more information about the business they are working in, compared with the takeover bidder.

Another example is the difference in the information enjoyed by the owners of a business and its managers. The managers normally have more information than the owners do.

See also

• Efficient market hypothesis
• Agency problem