Assignment:
Prior to beginning work on this assignment, read Hubbard and O'Brien's (2017) Chapter 9. Asymmetric information is the situation in which one party to an economic or financial transaction has better information than the other party, which results in two problems: adverse selection and moral hazard.
In your paper,
- Select a financial institution or market and discuss the causes of asymmetric information.
- Describe real-world examples of adverse selection and moral hazard problems for your institution/intermediary or market.
- Evaluate the impacts of adverse selection and moral hazard problems on your financial institution/intermediary or market.
- Discuss a principal-agent problem in your financial institution/intermediary or market. A principal-agent problem is a moral hazard problem between managers and shareholders.
- Analyze whether your financial institution/intermediary or market can reduce the adverse selection and/or moral hazard problems.
The Asymmetric Information paper
Must be three to four double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center.