Asymmetric information is a phenomenon arising when an agent on one side of a potential transaction knows something that is not observable to an agent on the other side. There are many ways in which asymmetric information can manifest itself. Adverse selection is one of them. Using the following two examples, let us clarify this definition and consider the problems that might arise when this phenomenon occurs in the health service.
For the first example, consider two foreign doctors who arrive in the UK planning to find jobs in the NHS. Foreign doctors may be very good but they may also be unqualified for some positions. The doctors know if they are good, but — since they went through a foreign qualification system — the NHS does not.
Your organisation does not have access to this article.
Sign up today to give your students the edge they need to achieve their best grades with subject expertise
Subscribe
