ECON 1000 Chapter Notes - Chapter 22: Voting Paradox, Condorcet Method, Adverse Selection
2 Feb 2017
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Document Summary
Asymmetric information some people are better informed than others; imbalance in information affects the choices they make & how they deal w/ one another. Political economy policy can potentially improve matters; depends on how well our political institutions work; field of political economy applies the tools of economics to understand the functioning of gov"t. Hidden action e. g. worker knows more than his employer abt how much effort he puts into his job. Hidden characteristic e. g. seller of used car knows more than the buyer abt the car"s condition. Party in the dark would like to know the relevant information but informed party may have incentive to conceal it. High wages worker who earns an above-equilibrium wage is less likely to shirk, b/c if she is caught & fired, she might not be able to find another high-paying job (efficiency-wage theories)
