Economics of Information

Information Economics studies how information affects the decision-making process and strategic behavior of individual economic units, such as firms and consumers. Information has economic value because it enables individuals to make better decisions that yield higher payoff than they would obtain from choices made in the absence of information. However, in many economic situations, individuals behave without full knowledge of the consequences of their actions, and often some individuals have better knowledge of the situation than others, arising the problem of asymmetric information.