The Economics of Information

Information is now a key issue in decision-making in economics and business. Knowledge is a vital resource which confers strategic advantages on those that possess it, and provides the possibility of misuse and abuse with increasingly dangerous economic consequences. This text is designed to take undergraduate and graduate students through the key issues and theoretical background to give of the impact of imperfect and asymmetric information in an economic context. At each stage, the book analyzes and explains the information problem using models that set the outcome under imperfect information against that under full information. The book is divided into four major sections covering: adverse selection problems under private information; the role of signalling mechanisms; moral hazard; and transaction mechanisms under imperfect information. Each section of the book also looks at the experimental studies that test the predictions of theory. It should be of interest to students at all levels who require an introduction to this critical area of economic theory.