In the study of competitive markets it is often assumed that consumers and producers have perfect market information upon which to make their economic decisions. This is known as symmetric information, where consumers and producers have perfect and equal market information on a good or service. Assuming that consumers and producers act in a realistic way, it will lead to an efficient allocation of resources. (Gavin 2008). However, in reality, consumers and producers have imperfect and unequal market knowledge upon which to make their economic decisions and this could lead to a misallocation of resources. The three competitive market models (monopolistic competition, oligopoly and monopoly) definitely have characteristics which prove that information in these markets is imperfect or asymmetric. For instance, it can be argued that in a market where a monopoly exists, the consumers and new firms which wish to enter the market, have imperfect knowledge about the monopoly’s pricing and output strategies.

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Information failure:

Some examples of information failure can be caused by inaccurate, misleading or complex information. For example, when you are purchasing a used car, you certainly know less about any problems the car might have, than the person selling it. Hence, after a short usage period the car might stop working due to a technical problem you could have known if information were symmetric. In addition, when a firm hires a new employee, that worker may have a much better idea about his or her ability than the firm. (Morgan, W., Katz, M. and Rosen, H., 2006). The firm on the other hand can underestimate or overestimate the employee’s abilities and this might have an impact on his salary. Whenever one side of the market has better information than the other, the asymmetric information issue arises. Furthermore, addiction is one of the main examples of information failure. Nowadays, technology is becoming more and more present in the consumers lives. The percentage of the people which are obsessed with certain goods is much larger than it was ten to fifteen years ago. A very recent example is the release of the new iPhone 6. Thousands of people were waiting in long queues to purchase the new apple product. (Williams, R., 2014) As researches have shown most of the people waiting in line were not aware of the functions of the new mobile phone and didn’t even need a new phone since they had purchased the previous iPhone model which was released a year ago.

Also, another example of incomplete information can be created by misunderstanding the true costs or benefits of a product. For instance, insurance companies do not know much about buyers’ health problems. People with greater hidden health problems are more likely to purchase health insurance than other people and the price of health insurance reflects the cost of a sicker-than- average person. As a consequence, people in average health may be discouraged from purchasing health insurance by the high prices set by the insurance companies. (Mankiw, N.G. and Taylor, M.P ,2014). Finally, imperfect information can be due to ignorance. If the market participant is aware that better information is available, information becomes another need or want. Information may be acquired through an economic transaction and becomes a possession that is a cost to the buyer or seller. Useful information is available as a market product in forms like books, media broadcasts, and consulting services. (Stengel,D.N.,2012)