Asymmetric Information and Market Prices
INFORMATION AND ECONOMIC THEORY A key strategy for corporate growth and development is innovation. Innovation generates proprietary information, company-specific knowledge, and new technology. A company’s products and services embody past innovation and the sum of proprietary information. One of the assumptions of the perfect competition model is complete information. All participants in a market know all relevant information. As discussed in an earlier tutorial, Introduction to Information and Economic Structure , this assumption is unrealistic in an imperfectly competitive economy dominated by large corporations. Proprietary information that cannot be duplicated by other companies allows a company to differentiate its products and services from those of other companies. Differentiated products and services reduce competition from other companies and limit the ability of a supplier or customer to play off one...