Information economics

Economics of information, or information economics, belongs to the field of microeconomics and it studies the importance of information in Economics. The neoclassical theory was developed around the assumptions of perfect information and the absence of uncertainty, and although this simplification allows modelling the reality, it is unrealistic. Economics of information is the result of an alteration in the usual neoclassical analysis, and it integrates the posibility of imperfect information that will result in asymmetric information.

Asymmetric information occurs in those situations in which an agent has greater information, either before or after, the interaction between agents happens. The study of these situations is of special relevance mainly to avoid the conflicts that will arise from them it. If an agent has inside information previous to the economic relations, ex-ante assymetry, adverse selection may occur. If the inside information is after the economic relations, post-ante, it will beconsidered moral hazard.

The importance and value of information within economics is huge. It eliminates risk and uncertainty, and it makes it possible to take better choices that will report higher yields. The less risk and uncertainty there is, the higher the utility will be valued.

The study of economics of information is key for many economic fields including game theory, agency theory or contract theory.

Comments

What if the two largest apex predators of all time, fought each other

First of all: So, what were/are the two largest apex predators in history? Well, baleen and sperm whales are predators but their status as apex predators are questionable at best, ruling them out. Many people think that a T-Rex, some sort of dinosaur, or other carnivorous land creature would be the largest apex predator. However, this is not true. Many of the largest apex predators in history have lived in the ocean because of the vast space to grow and since the water can support their larger weight. As of now, the two largest apex predators in history were Carcharocles Megalodon , a giant whale-eating shark and Livyatan Melvillei , a giant whale-eating raptorial whale both now extinct. Both of these animals were from similar time periods, and coexisted for a few million years. Livyatan appeared and went extinct during Megalodon’s rule. But how would these two fare in a battle against each other? Megalodon vs Livyatan: Carcharocles Megalodon- Size Estimates:-...

Can the Philippines become a developed country

keep growing its economy. get the Islamist insurgency under control and defeated. solve its traffic problem. The last is the hardest. I’ve the long term solution. First, why doesn’t Grab work everywhere? Remove the regulatory barriers. Second, while ride sharing helps, for a country of the density of the Philippines, mass transit rail is the only solution. However bringing mass transit rail directly to the cores of the cities like Manila is not practical. Instead, for now, take advantage of the growing population, and introduce mass transit rail with every development in the suburbs. Eventually there will be concentric rings of rail around each city, which will reduce the surface traffic in the cores because if it takes 50 times longer to move along the radius as as circumference, people will choose the circumference even if the distance is 6.28 times longer (circumference = 2 * radius * pi). Eventually people will abandon the cores, and this will be an opportunity for ...

Is overpopulation a myth

In Bangladesh, NO . 1,500 people per km². In Russia, YES . 8.4 people per km². The little red zone, which features Bangladesh, holds more people than the blue zone, which features Russia, in the following map. Not a myth for everyone. EDIT: For some strange reason some of the commenters think that this answer is advocating that the western countries should take in our extra population. Sorry to break the bad news, this is not advocating any such thing. For some even more bizarre reason some commenters are upset that I have compared overcrowded lands with unihabited lands (to the point of calling me “dishonest”). I don’t even know what to say to that. May be they just needed something to be upset about.

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