What is price efficiency?

Price efficiency is the concept that the price at which an asset sells should already reflect all supply and demand information pertaining to it that is already in the marketplace. A variation on the concept states that changes in this information are reflected instantly in the market price, while yet another version states that the price already reflects information that is both publicly and privately available.

Realistically, buyers and sellers may agree to prices that are different from what perfect information about an asset would state that the price should be, which suggests that price efficiency is an imperfect concept. Thus, price efficiency may be skewed by such factors as the relative need of the parties to a transaction to buy or sell an asset, as well as the perceived qualitative condition of the asset.

Related Topics

What are the non-price determinants of demand? 
What is cross price elasticity of demand? 
What is the price elasticity of demand formula?