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In economics and contract theory, information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry, a kind of market failure in the worst case. Examples of this problem are adverse selection,[1] moral hazard, and information monopoly.[2] Most commonly, information asymmetries are studied in the context of principal–agent problems. In 2001, the Nobel Prize in Economics was awarded to George Akerlof, Michael Spence, and Joseph E. Stiglitz "for their analyses of markets with asymmetric information."[3]

Information asymmetry models assume that at least one party to a transaction has relevant information whereas the other(s) do not. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement whereas the other(s) cannot.

In adverse selection models, the ignorant party lacks information while negotiating an agreed understanding of or contract to the transaction, whereas in moral hazard the ignorant party lacks information about performance of the agreed-upon transaction or lacks the ability to retaliate for a breach of the agreement. An example of adverse selection is when people who are high risk are more likely to buy insurance, because the insurance company cannot effectively discriminate against them, usually due to lack of information about the particular individual's risk but also sometimes by force of law or other constraints. An example of moral hazard is when people are more likely to behave recklessly after becoming insured, either because the insurer cannot observe this behavior or cannot effectively retaliate against it, for example by failing to renew the insurance.

You can improve your memory by learning memory techniques that are thousands of years old. That's what Nelson Dellis did to train for the USA Memory Championship, and you might know that Nelson has won the top prize for two years running. We have teamed up with Nelson to create this "Upgrade Your Memory" video that teaches memorization techniques that can enhance your business and personal life. Since we all have the same "hardware," it's really an upgrade of our "software," or brain, that makes all the difference.

years running. We have teamed up with Nelson to create this "Upgrade Your Memory" video that teaches memorization techniques that can enhance your business and personal life. Since we all have the same "hardware," it's really an upgrade of our "software," or brain, that makes all the difference. Fusion-io talked to Nelson to discuss the value of memory in our lives. Check out our interview with Nelson on the Fusion Blog: www.fusionio.com/blog/Follow us on Twitter: http://www.twitter.com/fusionioOr Like us on Facebook: http://www.facebook.com/#!/fusionio Category: Science & Technology Tags: Nelson Dellis upgrade your memory mental athlete USA Memory Competition USA Memory Championship USA Memory champion list memorization memorizing lists memory techniques Alzheimer's Climb for Memory Fusion-io fusionio fusion i/o Fusion IO @fusionio Licence: Standard YouTube Licence 261 likes, 3 dislikes Show more Show fewer Link to this comment: Share to: