a) What information asymmetry exists in the business (either in dealing with customers or the employee side of the business)?

b. What solutions have restaurants found to deal with these asymmetries?

A:

The major issues of assumption of information when dealing with customers is either in insurance or banking. In both case, the firms do not know what level of risk the customers pose to them. In the case of employees, firms do not know how productive these employees will be once they are hired. They have an idea based on the resume but the employee knows more about their value than the firm does.

B:

In the case of customers the firms asks for health or financial history in order to better gauge risk. They further do an in depth expectation of either the proposed business idea for banking or a health inspection in insurance. When dealing with employees, firms often contact previous employers to get references that the employee will not shirk and cost the firm money.