- "Information economics or the economics of information is the branch of microeconomics that studies how information and information systems affect an economy and economic decisions."
The study of how information affects economic behavior and outcomes, including adverse selection, moral hazard, and signaling. Particularly relevant in markets where there is asymmetric information, such as insurance or financial markets.
- "Examples include computer software (e.g., Microsoft Windows), pharmaceuticals, and technical books."
- "Once information is recorded 'on paper, in a computer, or on a compact disc, it can be reproduced and used by a second person essentially for free.'"
- "Without the basic research, initial production of high-information commodities may be too unprofitable to market, a type of market failure."
- "Government subsidization of basic research has been suggested as a way to mitigate the problem."
- "The subject of 'information economics' is treated under Journal of Economic Literature classification code JEL D8 – Information, Knowledge, and Uncertainty."
- "There are several subfields of information economics. Information as a signal has been described as a kind of negative measure of uncertainty."
- "Information economics is formally related to game theory as two different types of games that may apply, including games with perfect information, complete information, and incomplete information."
- "Experimental and game-theory methods have been developed to model and test theories of information economics, including potential public-policy applications such as mechanism design to elicit information-sharing and otherwise welfare-enhancing behavior."
- "An example of game theory in practice would be if two potential employees are going for the same promotion at work and are conversing with their employer about the job."
- "Whilst the less informed employee may be willing to accept a lower pay rise for the new job, the other may have more knowledge on what the role's hours and commitment would take and would expect a higher pay."
- "The employee with more information may misinform the other one about the value of the job for the work that is involved and make the promotion appear less appealing and hence not worth it."
- "This brings into action the incentives behind information economics and highlights non-cooperative games."
- "There have been influential advances in the study of information asymmetries and their implications for contract theory, including market failure as a possibility."
- "Potential public-policy applications include mechanism design to elicit information-sharing and otherwise welfare-enhancing behavior."
- "It includes complete and scientific knowledge as special cases. The first insights in information economics related to the economics of information goods."
- "Information economics studies how information and information systems affect an economy and economic decisions."
- "Information as signal has been described as a kind of negative measure of uncertainty."
- "Without the basic research, initial production of high-information commodities may be too unprofitable to market, a type of market failure."
- "Government subsidization of basic research has been suggested as a way to mitigate the problem."