Discussion#2

subject Type Homework Help
subject Pages 1
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subject School University of Arizona
subject Course bnad301

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Who are the parties and their resulting information?
What constitutes asymmetric information as defined in your text?
How do the parties or organizations deal with asymmetric information?
I want to discuss about buying new cars from the dealer. I think it is a good example of
asymmetric information. The parties involve buyers and sellers. The buyers can only know the
information of their dream cars from the internet. They can get some information from the car
reviewers from the internet. The sellers have the information of whether this type of car is
popular or the lowest price that the dealer can offer while guarantee that dealer can still make
money the sell.
Although the buyers can know the specs and basic information from other people, I
think the information from other people is biased. For example, the price of the car can vary in
different states and countries. So, the information is difficult for the buyers to bargain for a
good price. However, the sellers know the lowest price they can provide and they do their best
to offer the highest price. In addition, the sellers do not know when the dealers will provide
promotion on the cars. It happens that someone bought a car and found out that the price was
better or the finance interest rate is much lower after one month in an event of sales.
I think buyers better to compare more prices from other merchants. After the
comparison, they can know more about the price and specs of the cars.
I want to discuss about stock trading. The parties involve the buyers and the companies
which issue the shares. The buyers always want to buy low and sell high in order to make
money. The companies want to use shares to accumulate more money for business operation.

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