INFORMATION SYMMETRY Meaning and
Definition
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Information symmetry refers to a state in which all parties involved in an economic transaction have equal access to relevant and accurate information. In this scenario, there are no imbalances in the knowledge possessed by buyers and sellers or lenders and borrowers. It implies that all participants in the market have access to identical information regarding the quality, price, risks, and other aspects of the goods, services, or financial instruments involved in the transaction.
The concept of information symmetry is crucial for the efficient functioning of markets. When it exists, buyers can make well-informed decisions based on complete information, leading to fair pricing and optimal allocation of resources. Similarly, suppliers are able to make informed choices about the goods and services they provide.
In contrast, asymmetry of information occurs when one party has more knowledge or access to information than the other. This imbalance can lead to adverse effects such as market inefficiencies, price distortions, and even unethical practices such as fraud. Information asymmetry can exist in various forms, including hidden defects in products, misleading advertising, undisclosed risks, or undisclosed financial information.
Efforts to achieve information symmetry typically involve regulations, standards, and practices that promote transparency, disclosure, and fair dealing. These measures aim to reduce information asymmetry and ensure that all participants have equal access to accurate and relevant information.
Etymology of INFORMATION SYMMETRY
The term "information symmetry" does not have a specific etymology, as it is a combination of two separate words: "information" and "symmetry". However, understanding the etymology of each individual word can provide insight into its meaning.
1. Information: The word "information" originates from the Latin word "informatio", which means "concept" or "idea". In English, it was first recorded in the late 14th century and originally referred to the act of informing or being informed.
2. Symmetry: The term "symmetry" comes from the Greek word "symmetria", which means "agreement in dimensions, due proportion, arrangement". It entered the English language in the mid-16th century and is often used to describe a balanced and harmonious arrangement of parts.
