A Literature Review on Theories and Empirical Evidence Under Asymmetric Information

Main Article Content

Mutian Dai
Shanghai Weiyu International School, Shanghai, China

Yihan Hu
Shanghai Pudong Experimental School, Shanghai, China

DOI: https://doi.org/10.70267/icfmb.202619553560

Keywords

information asymmetry, adverse selection, signaling effect, principal-agent problem, market failure

Abstract

This article presents a comprehensive literature review investigating the theories and empirical evidence of information asymmetry and its impact on market outcomes. The article integrates classic theoretical frameworks: adverse selection, moral hazard, signaling and screening, and explores applications in four key areas: the lemon market, the insurance market, corporate governance and the labor market. This review points out that information asymmetry is the main cause of market failure, which can lead to inefficient phenomena such as adverse selection, principal-agent problems, and labor market discrimination. Empirical studies in different contexts have confirmed the importance of these theories in reality and demonstrated impact on pricing, resource allocation, and market structure. In addition, this article explores and illustrates various mechanisms to alleviate information asymmetry, including signaling systems, information disclosure, third-party certification, risk adjustment, and compensation systems. These solutions help enhance market efficiency by reducing uncertainty and aligning the interests of economic agents.

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References

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Published
Jul 30, 2026
Conference Proceedings Volume
Vol. 19 (2026): Proceedings of 2026 International Conference on Financial Technology, Mathematical Statistics, and Business Analytics (ICFMB 2026) - Part 2
Section
Articles
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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Dai, Mutian, and Yihan Hu. “A Literature Review on Theories and Empirical Evidence Under Asymmetric Information”. Exploring Science Academic Conference Series, vol. 19, July 2026, pp. 553-60, https://doi.org/10.70267/icfmb.202619553560.