Question

Matthew is a divisional manager at Venus Inc. and reports to the CEO of the company. The CEO delegates resources and authority to Matthew so that he can ensure good performance from the division. Matthew has more employees working for him than required and he has not told the CEO about this, even though there are other departments that are in need of more employees. Which of the following concepts is illustrated here?A) Information asymmetry
B) On-the-job consumption
C) Greenmail
D) Glass-ceiling effect
E) Takeover constraint

Answer 1

Answer:

A) Information asymmetry.

Explanation:

An information asymmetry can be defined as a situation where there is an imbalance of information between two parties in their knowledge of important points, factors and details. Thus, because one party has more information or knowledge than the other, this usually results in an inefficient outcome and or failure.

The theory of information asymmetry was developed and introduced by three (3) notable Nobel prize winning economists, namely; Michael Spence, George Akerlof and Joseph Stiglitz.

In this scenario, Matthew a divisional manager at Venus Inc. reports to the CEO of the company. Matthew has more employees working for him than required and he has not told the CEO about this, even though there are other departments that are in need of more employees.

Hence, the concept illustrated here is an information asymmetry.