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

Which countries are likely to be developed countries soon?

A lot of the answers have stated some of the Eastern European countries and I agree with them however another region that is soon going to have developed countries soon is Asia and Asia has some good candidates: The GDP Per Capita (PPP) benchmark to be counted as developed is in the $20–25,000 range and that is the bare minimum also the country’s HDI has to be higher than 0.800 with a diversified industrial composition. A total of 17 countries fit the bill however a closer look at their HDI or industrial composition would make it clear why they are not considered developed, a lot of them would be considered developed if they could fix these issues, most of this can be achieved within 10 years time, I will start by assessing each country on its major issue and how long it will take based on that: Qatar: Over reliance on one industry, time needed: 5 years Singapore: Already developed Brunei: Over reliance on one industry, time needed: ...

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 ...

What does spending $20bn on the world's longest bridge say about the strength of China's economy

Some people ask questions about China and the Chinese, which shows a complete ignorance of the Questioner. The best question/s come from people who understand China/the Chinese length and breadth of the culture. For example, this man at the best could be 140 lbs and carrying this load to deliver to a restaurant in the Yellow Mountains. The Chinese Government easily could deliver it through Helicopters, but they do not want to kill the livelihood of hundreds of such porter. To the Western World, it may not make sense, but the Eastern Culture makes sense. On the other hand, this mountain man who is fit as the fiddle, loves his livelihood, his mountainous surrounding. He does not give two hoots to bright lights of Shanghai, he does not want to move(I am guessing), and the Government of China recognizes it, and that is why most to the Chinese do not give two hoots for useless democracy and fake freedom. And President Xi and his wife the first lady are the darlings of the masses. Th...

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