Jahmeel C
Week 11 – Journal Entry 12
Economic Theories
Asymmetric Information Theory Akerlof’s “Market for Lemons”
Theory When one side of a transaction has more or better information than the other, this
is referred to as asymmetric information, and it can cause market inefficiencies. George
Akerlof’s “Market for Lemons” highlighted how this dynamic can result in bad choices
when customers are unable to evaluate a good or service’s quality because they are
missing important information.
Relation In this instance, the business knew more about the data leak than the clients did.
The corporation kept customers in the dark about the possible exploitation of their data
by postponing the notification for months after the breach. Without timely information,
customers were left vulnerable to identity theft. Highlighting the inefficiencies and
danger posed by the company’s delayed disclosure of important information.
Principal-Agent Theory
Theory The principal-agent theory deals with the potential misalignment of incentives between
the principal employer and the agent contracted party.
Relation The company principal depended on the agent, a third-party platform provider, to
handle its website and client information. A principal-agent issue was exposed when the
platform’s security failed, resulting in the hack. Despite depending on the platform provider to
guarantee data security, the corporation is still accountable for the breach and must deal with
consumer notifications and reputational damage.
Social Science Theories
Social Contract Theory
Theory According to the social contract theory, people agree to certain limitations in return for
security and advantages from organizations or governments.
Relation Customers have implicit faith that the business will safeguard their personal
information. The company violated its social contract with consumers by neglecting to
secure that information and postponing disclosure, eroding confidence and failing to
safeguard them from the possibility of harm.
conflict Theory
Theory Conflict theory argues that society is divided into groups that have unequal access to
power, resources, and opportunities. Those with power the wealthy often exploit those with less
power the lower class, which creates conflict between these groups.
Relation The company’s failure to secure customer data reflects a power imbalance. The
company holds control over customer information, yet its actions put consumers at risk without
immediate consequences for itself. While consumers are at risk of danger and vulnerability.

conflict Theory
Theory Conflict theory argues that society is divided into groups that have unequal access to
power, resources, and opportunities. Those with power the wealthy often exploit those with less
power the lower class, which creates conflict between these groups.
Relation The company’s failure to secure customer data reflects a power imbalance. The
company holds control over customer information, yet its actions put consumers at risk without
immediate consequences for itself. While consumers are at risk of danger and vulnerability.