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In this revised second edition, An Introduction to the Economics of Information covers the consequences for the character and efficiency of the interaction between individuals and organizations when one party has more or better information on some aspect of the relationship. This is the condition of asymmetric information, under which the information gap will be exploited if, by doing so, the better-informed party can achieve some advantage. The book is written for a one-semester course for advanced undergraduates taking specialized course options, and for first-year postgraduate students of economics or business.After an introduction to the subject and the presentation of a benchmark model in which both parties share the same
information throughout the relationship, chapters are devoted to the three main asymmetric information topics of Moral Hazard, Adverse Selection, and Signalling.The wide range of economic situations where the conclusions are applied includes such areas as finance, regulation, insurance, labour economics, health economics, and even politics. Each chapter presents the basic theory before moving on to applications and advanced topics. The problems are presented in the same framework throughout to allow easy comparison of the different results. This new edition incorporates extended exercises to test the student's understanding of the material, and to develop the tools and skills provided by the main text to solve other, original
Readership: Graduate students of economics, with some advanced undergraduate potential. A core text for courses on the economics of information; supplementary reading for general microeconomics and industrial organization courses.
Inés Macho-Stadler, Associate Professor of Economics, Universitat Autonoma de Barcelona, and J. David Pérez-Castrillo, Associate Professor of Economics, Universitat Autonoma de Barcelona
"It is a timely contribution to the discipline of Economics as a whole and in particular to Information Economics. Ian Jackson, Staffordshire University"
"The material is self-contained presuming no prior knowlede by the reader other than elementary microeconomics and calculus...the presentation is rigorous without being overly technical. The authors make excellent use of time-lines and diagrams supplement the formal analysis...All audiences will appreciate the extensive references to the literature as well as the numerous problem sets at the end of the chapters. Stefan Reicheistein, Journal of Economics"
"Although written for first-year postgraduate students of economics or business and for advanced undergraduates with its wide range of applications discussed from such areas as finance, regulation, insurance, tehnology transfer, labour economics, and health economics, this book provides also an excellent survey for the general reader interested in the latest developments in this field. Beate Reszat, The Economic Journal"
2: The Base Model
3: The Moral Hazard Problem
4: The Adverse Selection Problem