Information economics

Information economics or the economics of information is a branch of microeconomic theory that studies how information and information systems affect an economy and economic decisions. Information has special characteristics: It is easy to create but hard to trust. It is easy to spread but hard to control. It influences many decisions. These special characteristics (as compared with other types of goods) complicate many standard economic theories.

The subject of "information economics" is treated under Journal of Economic Literature classification code JEL D8 – Information, Knowledge, and Uncertainty. The present article reflects topics included in that code. There are several subfields of information economics. Information as signal has been described as a kind of negative measure of uncertainty. It includes complete and scientific knowledge as special cases. The first insights in information economics related to the economics of information goods.

In recent decades, there have been influential advances in the study of information asymmetries and their implications for contract theory, including market failure as a possibility.

Information economics is formally related to game theory as two different types of games that may apply, including games with perfect information,complete information, and incomplete information.Experimental and game-theory methods have been developed to model and test theories of information economics, including potential public-policy applications such as mechanism design to elicit information-sharing and otherwise welfare-enhancing behavior.

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