The market for education has information asymmetry inherent to it. When education is privatized, universities have the incentive to run with the profit motive and sell academic qualifications to earn income. Since formally recognized education is important for a professional career and economic livelihood, consumers have the incentive to purchase academic qualifications. The information asymmetry exists between the service providers i.e. the educators and the students. Only educators know the required amount of education and the parameters that qualify for a degree. The market can be exploited for commerce that can lead to the generation of a negative externality from the perils of an insufficiently educated workforce.

For example, if universities have no answerability, they can actively participate in the trade of degrees. Consequently, the financially rich strata of the population will act as a demanding consumer base and will pay to buy degrees regardless of whether education has been imparted to students or not. The prices will become artificially high as the sellers will only serve those who are ready to pay a large price to get preferential treatment and easy access. In the long run, the eligible workforce produced in the system will be highly inefficient and unproductive due to the lack of actual education, training, and know-how. The cost of the inefficient workforce will directly fall upon society, representing a negative externality. This is why government intervention becomes vital for the health of the market. Government intervention not only dissolves information asymmetry but also precludes the segregation of the consumer base on the basis of purchasing power. At the same time, the negative externality is prevented when service providers adhere to a minimum set of regulations to grant degrees.