Tag: information asymmetry

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An asymmetrical crisis?

The economist Joseph Stiglitz won the Nobel Prize for Economics in 2001. Along with George Akerlof and Michael Spence, he worked out a theory of information asymmetry: a situation where both parties in a transaction have different levels of information. Could this theory have some relevance as an explanation of the current financial crisis?

In praise of …..Joseph Stiglitz Guardian (8/10/08)
Stiglitz lecture on financial crisis available online University of Manchester (13/10/08)

Questions

1. Explain what is meant by information asymmetry.
2. Explain how information asymmetry can lead to markets working imperfectly.
3. Discuss the extent to which the theory of information asymmetry may be relevant as a partial determinant of the current financial crisis.
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Minibar extras

Have you ever had a drink or packet of peanuts from a hotel minibar and then regretted being tempted when you saw the price on checkout? If things like minibars and internet access are so over-priced in hotels, then how can they get away with it? Why do people pay these amounts and what can economics tell us about this pricing behaviour?

Minibar economics MSN Slate (17/2/07)

Questions

1. Explain the reasoning behind hotel pricing strategies for rooms and minibars.
2. Discuss the impact of competition on hotel pricing strategies for rooms and extras like minibars and internet access.
3. Examine the reasons why more companies do not do “advertising campaigns boasting about their what-you-see-is-what-you-get pricing”.