Week 12 Flashcards
(3 cards)
1
Q
Asymmetric Information
A
A difference in access to knowledge that is relevant to an interaction
2
Q
How banks solve asymmetric information in regards to signalling
A
Good borrowers signal the quality by offering collateral
Bad borrowers pay higher interest rates and offer lower collateral
3
Q
How banks solve asymmetric information in regards to screening
A
Private markets can sometimes deal with information asymmetries on their own
Government rarely has more information than the private parties
Government is an imperfect institution
