Information asymmetry
Information asymmetry exists when parties to a relationship have different relevant information. A manager may know more about effort, resources or risks than the person evaluating them. It can affect budgets, contracts, market decisions and the credibility of reports. Controls, disclosure and incentives can reduce some problems, but collecting more data has costs and does not ensure that all private information becomes observable.
Worked example
A department manager knows a project can be delivered for $80,000 while the approving manager sees only the requested $100,000 budget.
Common mistake
Different information is not automatically deliberate deception; identify the actual incentive and risk before alleging manipulation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | APM | Supporting | September 2026–June 2027 |