BPH HEHF-MARKET FAILURE-IA

1. INFORMATION ASYMMETRY
GANESH POUDEL
BPH 6TH SEM
NAMS COLLEGE

2. “
SURPRISE IS THE MOTHER OF PANIC
-NICK MURRAY

3. When there is an
imbalance in the
quantity of a product
demanded and
supplied, it leads to an
inefficient allocation of
resources called
market failure.
MARKET
FAILURE

4. Information asymmetry is, just as the term
suggests, unequal, disproportionate, or
lopsided information.
INFORMATION
ASYMMETRY

5. INFORMATION FAILURE/ IA
▹ Condition in which one party to an economic
transaction possesses greater material knowledge than
the other party is IA.
▹ One party in transaction does not know enough about
other party to make accurate decision due to:
 Under-allocation of resources.
 Better information too costly.

6. LEMON PROBLEM
(GEORGE AKERLOF-NOBEL PRICE WINNER)
Lemon problem arises when it is not possible to
distinguish reliable products from lemon(defective
product).
▹ Buyer are only willing to pay at lemon price.
▹ Sellers of reliable products exit from market.
▹ Only lemon products remain in market.

8. IN HEALTH

9. Ctd..
▹ Asymmetric information exchange
between providers and patients
contributes to medical errors,
patients frustration, over-
treatment and under-treatment in
healthcare practice.

10. Ctd…
▹ Doctors and other caregivers overwhelm
patients with information and deliver
treatments that often are unnecessary;
▹ Doctors and other caregivers do not
engage patients sufficiently and fail to
provide necessary care; and
▹ Uninformed patients demand unnecessary
treatments (often based on anecdotal
experience, social media conversations or
faulty research).

11. PROBLEM SEEN AS
MORAL HAZARD
Moral hazard is the risk that a party
has not entered into a contract in good
faith or has provided misleading
information about its assets, liabilities,
or credit capacity.

12. Ctd..
ADVERSE SELECTION
Adverse selection is when sellers have
information that buyers do not have, or
vice versa, about some aspect of
product quality.

13. DISADVANTAGES

14. INTERVENTION

15. THANK YOU