User:Mandobobafett/sandbox
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Sandbox Page
[edit]My intended modifications including chosen additional components:
[edit]- Cross references to other pages
- Artificial Intelligence
- Game Theory
- MFIs (Microfinance Institutions) linked to Microfinance
- Modigliani-Miller theorem
- lemon
- Simultaneous game
- Sequential game
- perfect information
- James Fearon (political scientist at Stanford)
- Reorganization
- Reorganize the page
- Models
- Adverse Selection
- Signalling
- Screening
- Information gathering
- Sources (change to - Sources of Information Asymmetry)
- Applications in Research
- Reorganize the the 'Application in research' section with the following subsections and elaborate on these subsections
- Accounting and Finance
- Game Theory
- Artificial Intelligence
- Management
- Remove the 'Information asymmetry and artificial intelligence' section and incorporate it within the 'Application in research' section
- Remove the 'Effect of Blogging' section and incorporate it within the 'Accounting and Finance' subsection of the 'Application in research' section
- Reorganize the page
- Filling gaps
- Smaller additions
- Add to the 'Screening' subsection of the 'Adverse Selection' section. Specifically, write about 'counteracting institutions'.
- Add a picture/graphic
- Source 8 (relating to the Nobel Prize) has a link that doesn't work anymore.
- Wrong link: https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2001/stiglitz-lecture.pdf
- Correct link: https://www.nobelprize.org/prizes/economic-sciences/2001/summary/
- Other pages referring to the Information asymmetry wikipage
- Simultaneous game
- Game Theory
Sources and Articles (Bibliography):
[edit]- https://ocw.mit.edu/courses/sloan-school-of-management/15-025-game-theory-for-strategic-advantage-spring-2015/lecture-notes/MIT15_025S15_Lec_15.pdf
- https://tel.archives-ouvertes.fr/tel-01816041/document
- https://www.sciencedirect.com/science/article/abs/pii/S0305054813003456
- https://www.jstor.org/stable/1884183?seq=1#metadata_info_tab_contents
- https://journals.sagepub.com/doi/10.1177/0149206318798026
- https://pdfs.semanticscholar.org/cdc1/10d48cfa54659f3a09620d51240f09cf1acc.pdf
- https://www.sciencedirect.com/science/article/pii/S2351978918312940
- https://siteresources.worldbank.org/DEC/Resources/84797-1114437274304/Asymmetric_Info_Sep2003.pdf
- https://arxiv.org/pdf/1510.02867.pdf
- https://pdfs.semanticscholar.org/6286/d329992db765469cb0617f213cdeac3d6954.pdf
- https://www.academia.edu/30788753/Financial_blogs_and_information_asymmetry_between_firm_insiders_and_outsiders
- https://journals.aom.org/doi/10.5465/amr.2010.0404
- https://journals.aom.org/doi/10.5465/amj.2009.0549
- https://www.jstor.org/stable/2706903?seq=1#metadata_info_tab_contents
Screening (Original from Wiki page)
[edit]Joseph E. Stiglitz pioneered the theory of screening. In this way the underinformed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party.
Examples of situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, mortgage brokers and loan originators, stockbrokers and real estate agents.
Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, life insurance, or sales of old art pieces without prior professional assessment of their value. This situation was first described by Kenneth J. Arrow in an article on health care in 1963.[1]
George Akerlof in The Market for Lemons notices that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. Because of information asymmetry, unscrupulous sellers can "spoof" items (like replica goods such as watches) and defraud the buyer. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases, or will not spend as much for a given item. Akerlof demonstrates that it is even possible for the market to decay to the point of nonexistence.
Screening (my proposed version)
[edit]Joseph E. Stiglitz pioneered the theory of screening. In this way the underinformed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party.
Examples of situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, mortgage brokers and loan originators, stockbrokers and real estate agents.
Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, life insurance, or sales of old art pieces without prior professional assessment of their value. This situation was first described by Kenneth J. Arrow in an article on health care in 1963.[2]
George Akerlof in The Market for Lemons notices that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. Because of information asymmetry, unscrupulous sellers can "spoof" items (like replica goods such as watches) and defraud the buyer. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases, or will not spend as much for a given item. Akerlof demonstrates that it is even possible for the market to decay to the point of nonexistence.
Akerlof also suggests different methods with which information asymmetry can be reduced. One of those instruments that can be used to reduce the information asymmetry between market participants is intermediary market institutions called counteracting institutions, for instance, a guarantees for goods. By providing a guarantee, the buyer in the transaction can use extra time to obtain the same amount of information about the good as the seller before the buyer takes on the complete risk of the good being a "lemon". Other market mechanisms that help reduce the imbalance in information include brand-names, chains and franchising that guarantee the buyer a threshold quality level. These mechanisms also let owners of high quality products get the full value of the good. These counteracting institutions then keep the market size from reducing to zero.
Application in research (Original from wiki page)
[edit]Since the seminal contributions of Akerlof, Spence, and Stiglitz, the pervasive effects of information asymmetry in markets have been documented and studied in numerous contexts. In particular, a substantial portion of research in the field of accounting can be framed in terms of information asymmetry, since accounting involves the transmission of an enterprise's information from those who have it to those who need it for decision-making. Likewise, financial economists apply information asymmetry in studies of differentially informed financial market participants (insiders, stock analysts, investors, etc.) or in the cost of finance for MFIs.[3] Information asymmetry has also seen some use in behavioral economics.
Application in research (my proposed version)
[edit]Accounting and Finance
[edit]A substantial portion of research in the field of accounting can be framed in terms of information asymmetry, since accounting involves the transmission of an enterprise's information from those who have it to those who need it for decision-making. Likewise, in finance literature, the acknowledgment of information asymmetry between organizations challenged the Modigliani-Miller theorem, which states that the valuation of a firm is unaffected by its financial structure. Information asymmetry shed light on the importance of aligning interests of managers with those of stakeholders. Furthermore, financial economists apply information asymmetry in studies of differentially informed financial market participants (insiders, stock analysts, investors, etc.) or in the cost of finance for MFIs.[4]
Effect of blogging
[edit]The effect of blogging as a source of information asymmetry as well as a tool reduce asymmetric information has also been well studied. Blogging on financial websites provides bottom-up communication among investors, analysts, journalists, and academics, as financial blogs help prevent people in charge from withholding financial information from their company and the general public.[5] Compared to traditional forms of media such as newspapers and magazines, blogging provides an easy-to-access venue for information. A 2013 study by Saxton and Anker concluded that more participation on blogging sites from credible individuals reduces information asymmetry between corporate insiders, additionally reducing the risk of insider trading.[6]
Game Theory
[edit]A large amount of the foundational ideas in game theory builds on the framework of information asymmetry. In simultaneous games, each player has no prior knowledge of an opponent's move and with sequential games, players have little prior knowledge of the opponent's move but often don't have perfect information. Therefore, the existence and level of information asymmetry in a game determines the dynamics of the game. James Fearon in his study of the explanations for war in a game theoretic context notices that war could be a consequence of information asymmetry - two countries will not reach a non-violent settlement because they have incentives to distort the amount of military resources they possess. [7]
Artificial Intelligence
[edit]Tshilidzi Marwala and Evan Hurwitz in their study of the relationship between information asymmetry and artificial intelligence observed that there is a reduced level of information asymmetry between two artificial intelligent agents than between two human agents. As a consequence, when these artificial intelligent agents engage in financial markets it reduces arbitrage opportunities making markets more efficient. The study also revealed that as the number of artificial intelligent agents in the market increase, the volume of trades in the market will decrease.[8][9] This is primarily because information asymmetry of the perceptions of value of goods and services is the basis of trade.
Management
[edit]Information asymmetry has been applied in a variety of ways in management research ranging from conceptualizations of information asymmetry to building resolutions to reduce it.[10] A 2013 study by Schmidt and Keil has revealed that the presence of private information asymmetry within firms influences normal business acitivites. Firms that have a more concrete understanding of their resources can use this information to gauge their advantage over competitors.[11] In Ozeml, Reur and Gulati's 2013 study, they found that 'different information' was an additional source of information asymmetry in in venture capitalist and alliance networks; when different team members bring diverse, specialized knowledge, values and outlooks towards a common strategic decision making event, the lack of homogenous information distribution among the members leads to inefficient decision making. [12]
- ^ Arrow, Kenneth J. (1963). "Uncertainty and the Welfare Economics of Medical Care". American Economic Review. 53 (5). American Economic Association: 941–973. JSTOR 1812044.
- ^ Arrow, Kenneth J. (1963). "Uncertainty and the Welfare Economics of Medical Care". American Economic Review. 53 (5). American Economic Association: 941–973. JSTOR 1812044.
- ^ Garmaise, M. & G. Natividad (2010). "Information, the Cost of Credit, and Operational Efficiency: An Empirical Study of Microfinance". Review of Financial Studies. 23 (6): 2560–2590. doi:10.1093/rfs/hhq021.
- ^ Garmaise, M. & G. Natividad (2010). "Information, the Cost of Credit, and Operational Efficiency: An Empirical Study of Microfinance". Review of Financial Studies. 23 (6): 2560–2590. doi:10.1093/rfs/hhq021.
- ^ Saxton, Gregory D. "Financial blogs and information asymmetry between firm insiders and outsiders". annual meeting of the American Accounting Association.
- ^ Saxton, G. D. and A. E. Anker (2013). "The Aggregate Effects of Decentralized Knowledge Production: Financial Bloggers and Information Asymmetries in the Stock Market." Journal of Communication 63(6): 1054-1069.
- ^ Fearon, James D. (1995). "Rationalist Explanations for War". International Organization. 49 (3): 379–414. ISSN 0020-8183.
- ^ Marwala, Tshilidzi; Hurwitz, Evan (2017). Artificial Intelligence and Economic Theory: Skynet in the Market. London: Springer. ISBN 978-3-319-66104-9.
- ^ "Artificial Intelligence can Reduce Information Asymmetry : Networks Course blog for INFO 2040/CS 2850/Econ 2040/SOC 2090". Retrieved 2020-03-01.
- ^ Bergh, Donald D.; Ketchen, David J.; Orlandi, Ilaria; Heugens, Pursey P. M. A. R.; Boyd, Brian K. (2018-09-21). "Information Asymmetry in Management Research: Past Accomplishments and Future Opportunities". Journal of Management. 45 (1): 122–158. doi:10.1177/0149206318798026. ISSN 0149-2063.
- ^ Schmidt, Jens; Keil, Thomas (2013-04-01). "What Makes a Resource Valuable? Identifying the Drivers of Firm-Idiosyncratic Resource Value". Academy of Management Review. 38 (2): 206–228. doi:10.5465/amr.2010.0404. ISSN 0363-7425.
- ^ Ozmel, Umit; Reuer, Jeffrey J.; Gulati, Ranjay (2012-07-24). "Signals across Multiple Networks: How Venture Capital and Alliance Networks Affect Interorganizational Collaboration". Academy of Management Journal. 56 (3): 852–866. doi:10.5465/amj.2009.0549. ISSN 0001-4273.