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Asymmetric information in case of decision under risk

Author

Listed:
  • Constantin Anghelache

    (Bucharest University of Economic Studies, “Artifex” University of Bucharest)

  • Bodo Gyorgy

    (Bucharest University of Economic Studies)

  • Andreea Ioana Marinescu

    (Bucharest University of Economic Studies)

Abstract

The differentiated access level to the information is one of the key issue in the decision making process under risk. Typical cases with asymmetry of information are: the sale-purchase of goods, the insurance market (auto, health, life), the financial sector (loan contract), the labour market and others. Information asymmetry is considered the source of economic inefficiency, and therefore is more focus is put on the study of its effect. In this paper we analysed different aspects related to the information asymmetry, such as the adverse selection, the moral hazard, the principal-agent problem. Also we studied various involvement of the parties in each situation by analysing particular scenarios, and try to build simple models which illustrates the essence and the implication of the information asymmetry on the decision making process. Finally, we tried to identify optimal solutions where both involved party would have higher benefits, and also their expected behaviour to reach that state.

Suggested Citation

  • Constantin Anghelache & Bodo Gyorgy & Andreea Ioana Marinescu, 2017. "Asymmetric information in case of decision under risk," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(1), pages 22-36, January.
    • Handle: RePEc:rsr:supplm:v:65:y:2017:i:1:p:22-36
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    References listed on IDEAS

    as
    1. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    2. Constantin ANGHELACHE & Madalina Gabriela ANGHEL, 2014. "The model of W.F. Sharpe and the model of the global regression utilized for the portfolio selection," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 62(7), pages 124-131, July.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Citations

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    Cited by:

    1. Constantin ANGHELACHE & Andreea – Ioana MARINESCU & Maria MIREA, 2017. "Models of Insolvency Risk Analysis in Financial and Banking Institutions," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(11), pages 72-78, November.
    2. Ana Maria Popescu, 2018. "The Main Theoretical Aspects Regarding Bank Risks: Models for their Management," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(1), pages 153-160, January.
    3. Constantin Anghelache & Gyorgy Bodo, 2018. "General Methods of Management the Credit Risk," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(1), pages 143-152, January.
    4. Aurelian DIACONU & Doina AVRAM, 2017. "General Aspects of Risk and Uncertainty in Making Financial – Economic Decisions," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(6), pages 40-50, June.
    5. Aurelian DIACONU & Alexandru BADIU & Doina AVRAM & Doina BUREA & Marius POPOVICI, 2017. "Operational Risk Management," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 65(5), pages 221-229, May.

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    More about this item

    Keywords

    Information asymmetry; risk; decision making; insurance; adverse selection; moral hazard; principal-agent problem; expected utility;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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