Asymmetric information exists when a firm's manager knows more about the firm's prospects than the typical investor does.
Asymmetric information, commonly referred to as "information failure," is when one party in an economic transaction has more in-depth knowledge of the relevant subject matter than the other party. This often occurs whenever the vendor of a good or service has more expertise than the buyer, but the dynamic can also work in reverse.
Asymmetric information are present in almost all economic transactions. If applied to any commercial trade, asymmetric information can also be defined as the concentration or division of knowledge. For example, doctors often know further about practices than their customers. After all, people typically lack the significant medical schooling that physicians have.
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