New Markets as Informational Asymmetries

Abstract

The neglected advantages of “new markets” in marginalized rural and inner-city areas have been touted in the policy arena since the early 1990s. Althoughmuch of the motivation has been based on equity, there are potentially strong efficiency arguments for such renewed attention. This article proposes a unique combination of classic and more recent work on informational market failures to understand new markets as examples of informational asymmetries, which can provide the rationale for both private and public support of new market ventures. Furthermore, this perspective can help explain persistent intraregional differences in economic development prospects due to path dependencies inherent in varying informational settings.

Keywords

information asymmetry new markets economic development market failure

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