Bài giảng MicroEconomics - Chapter 17 Asymmetric Information, Voting, and Public Choice

17Asymmetric Information, Voting, and Public ChoiceMcGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.LO1Information FailuresAsymmetric InformationMarket failureIncomplete information for buyers or sellersBetter information is too costly17-2Inadequate Information LO1Inadequate Buyer Information on SellersInadequate Seller Information on BuyersCauses underallocation of resourcesCauses underallocation of resourcesGasoline marketMoral HazardLicensing of surgeonsHeavy costs on insurers17-3LO1Adverse Selection ProblemAdverse selection defined:Second party incurs major costs due to lack of informationAdverse selection happens at the time the contract is signedPrevents pooling of low and high risksEliminate adverse selection by government requiring social insurance17-4LO1Workplace SafetyExpensiveWorkers have adequate information Avoid unsafe workplacesAsymmetric information Firms have no incentive to improve workplace safetyGovernment sets safety standards17-5LO1Qualification: Asymmetric Information Government intervention is not always necessaryFirms offer product warrantiesFranchisers provide a known productPrivate firms provide product information to buyers17-6LO2Public Choice TheoryMajority voting systemsDifficult to correctly discern voter preferencesHinders the ability of government to deliver what the voters want17-7LO3Majority VotingDetermines the size and scope of government involvement in the economyReveals preferences Results can be inconsistent and imperfect due to: Presentation order of the choices Distribution of the costs vs. benefits17-8LO3Inefficient Voting OutcomesPublic good beneficial (TB) > (TC)Inefficient “No” voteTB > TCInefficient “Yes” voteTC > TB Interest groups and logrolling17-9LO2Median Voter ModelMedian voter preference will determine size of government ImplicationsMany voters are dissatisfied with size of governmentVoters move where preferences are closer to theirs17-10LO3Government FailureInefficient outcomes caused by governmentVoting problemsPrincipal-agent problemSpecial-interest effectRent seeking behavior17-11LO3Clear Benefits, Hidden CostsLimited and bundled choicesCitizen has only two choices for candidates for electionBureaucracy and Inefficiency Public agencies are less efficient than private businessCorruption: accept a bribeImperfect institutions: healthcare17-12LO3Global Perspective17-13