Week 15 — Asymmetric Information, Behavioral Economics & Inequality

Why this matters

A shopper weighing a used car from a stranger and a new employee deciding whether to stay in an automatic retirement plan both meet this week's ideas, and so does a community-health analyst reading how a region's income is shared.

In plain language

Some trades go wrong because one side knows more: the seller knows a car's history, and you get one short drive; economists call that gap asymmetric information (one side of a deal knows something the other does not). This week you will see how that gap can empty a market of its best goods, and how warranties and inspections win the trade back. You will also meet behavioral economics (the study of the predictable ways real people choose differently from the careful chooser in our models), including why a default option can change what millions of people do. Then you will measure how evenly income is shared with one curve and one number. Last, you will look back over the whole term and ask when markets work well, when they fail, and how to weigh what to do about it.

• Already covered: Weeks 1 to 14 built every model, from scarcity to externalities.
• This week: hidden information, behavioral patterns, inequality, and the course synthesis.
• How they connect: surplus measures what hidden information costs; positive versus normative frames every policy question.

Focus

What happens to a market when one side knows more, and how do economists measure who gets what?

By the end of this module, you should be able to:

• [ ] tell adverse selection from moral hazard with the timing test
• [ ] explain why an uninformed offer drives good used cars out
• [ ] name four behavioral patterns and the power of defaults
• [ ] compute a Gini coefficient from a Lorenz curve and label claims about it

To-do

Plan your week

1. Read Chapter 15 (~50–60 minutes), then the lecture and slides.
2. Work the lecture tutorial (60–90 minutes).
3. Do the practice exercises (15–25 minutes).
4. Do the Model Workshop (about 90 minutes), discussion, and assignment.
5. Take the quiz.

This week's checkpoint: work the lemons market's uninformed offer, and compute and read a Gini coefficient.

You've got this

Take it in order, and ask your instructor early if stuck. The final exam in Week 16 builds on this week.

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