Forms of Asymmetric Information

Asymmetric information implies information deficits on one side of a transaction. This deficit may exist randomly or systematically in certain situations. The partners of a transaction are usually called “principal” and “agent,” where the principal gets a certain result and the agent delivers (and produces) it. The ftve different parts of the tourism industry constitute together with the travelers a six-stage or six-level principal-
agent problem. In effect each component within the system can be principal or agent depending upon the context of the situation concerned. The basic assumptions, problems and possible solutions of principalagent
problems have been discussed widely (Picot, Dietl & Franck, 1999: 85-131; Jensen & Meckling, 1976; Pi-att & Zeckhauser, 1985; Spremann, 1988, 1989, 1990), so we wili, after a brief description of the core problems,
focus on the industry-specific aspects. There are four kinds of asymmetries related to the different attributes
of the situation between the principal and the agent: “Hidden Characteristics,” “Hidden Actions,” “Hidden Information” and “Hidden Intentions.” They are connected with each other and there are a number of
possible actions to deal with these asymmetries, which shall be discussed under the specific aspect of tourism industry. Hidden characteristics imply that the agents or their products have attributes known to themselves, but not made known to tbe principals. Akerlof (1970) fu’st discussed this problem for the market of used cars,
where the seller knows what is wrong (or not) with his car. The potential buyers aren’t aware ofthe “real” condition ofthe vehicle and are therefore only willing to pay the price for an “average” car. Therefore the
good cars will not be offered in the market which means that cars in average condition will be of an increasingly lower standard. This “adverse selection” leads to “a market of letiions.” In the tourism industry, the carriers are possibly in a comparable situation in respect to their quality and security standards and their price policy: The travelers cannot know orevaluate(this would be a case of hidden information) the good or bad standards ofthe various carriers, so they are only willing to pay the average standard; therefore better standards will vanish from the market and the average will deteriorate.