What underlying cause leads to the inefficiencies observed in markets due to information asymmetry, particularly in the context of public goods?

Information asymmetry happens when one party in a market has more or better information than the other. This can lead to inefficiencies because consumers may not fully understand the value or quality of a public good, like clean air or public parks, which are available to everyone. For example, if a community does not know how much pollution affects their health, they might not support measures to reduce it, leading to a lack of funding and maintenance for clean air initiatives. This lack of awareness means that public goods are underused or underfunded, as people do not realize how much they benefit from them. Ultimately, when information is unevenly distributed, the market fails to allocate resources effectively, resulting in fewer public goods being provided.