Answer to Question #208915 in Marketing for saleemaslam

Question

 

1.     Explain how government regulation can lessen asymmetric information problems but not eliminate them using Enron as an example.

Answer 1

The government regulation can lessen asymmetric information problems, but not eliminate them using Enron as an example because it is in the position to offer information about borrowers and offer it to investors free of charge. Through banning certain activities and asset categories considered took risk is another way that the government regulation can reduce asymmetric information problems. Lastly, establishing minimum capital requirements can also be used by the government regulations to decrease asymmetric information, but would not eliminate using Enron.