Incomplete Information and Asymmetric Information

Asymmetric information refers to that uncertainty which arises as a result of co-ordination problems between two agents. This has a limited applicability in the understanding of how businessmen attempt to protect themselves against the possible fluctuation in macro-economic variables and from a possible adverse competitive atmosphere. This paper argues that incomplete information allows us to identify those variables whose unknown position might cause uncertainty, which in turn allows us to understand why, and types of, measures are undertaken by businessmen in an attempt to protect themselves from the adverse impact of unforeseen events. Results from these measures are contrary to the findings of the neo-classical model.