An Introduction to the Economics of Information

An Introduction to the Economics of Information examines how uneven distribution of information shapes the interactions between individuals and organizations. With a focus on the challenges and opportunities created by asymmetric information, the book explains how parties with superior knowledge can secure distinct advantages in various economic settings. Designed primarily for advanced undergraduate and first-year postgraduate students in economics and business, the text begins by presenting a benchmark model where both sides possess equal information. It then methodically explores the key topics of moral hazard, adverse selection, and signalling, laying a solid foundation in the theory of information economics. The authors illustrate the application of these concepts across a broad spectrum of economic scenarios including finance, regulation, insurance, labour and health economics, and even political contexts. Each chapter builds on the basic theory by integrating practical examples and advanced discussions, ensuring that readers can easily compare and understand differing outcomes within a consistent framework. Enhanced with a range of exercises that test comprehension and encourage the development of analytical skills, this book provides a thorough and accessible introduction to the dynamic field of information economics.