George Akerlof's Paper Thesis

What was striking about the attitude of the seller. (name 3 attributes of behavior) 3 Points

Of course, the global economy couldn't very well function without this wall of ignorance and the indifference it breeds” (Pollan 253). Michael Pollan is asking for perfect information, which essentially means that all consumers know all the information, about all their food, all the time. Even if each individual tried to know more about their food other than “the price disclosed by the checkout scanner”, it would yet again be another oversimplification that is too broad to address the problem. In reality Pollan’s solution is a physical impossibility as proved by the Bekenstein bound, which places a limit to the amount of information that can be stored in a system. As a realistic solution this comprehensively falls short, and as a hypothetical the economy would still be able to function “without this wall of ignorance and indifference it breeds.” In fact, the opposite is accurate—information asymmetry is what causes negative market implications. Information asymmetry, studied and researched by Nobel Memorial Prize Winner in Economic Sciences, Joseph Stiglitz, deals with the study of decisions in transactions where one group has more or better information over the other, and often this can

The prospective buyers may end up paying more than how much it would have cost if they had been given the proper information. Equal knowledge and opportunity transactions tend to not take place because of this. The one with the most power of knowledge will reap the greater benefits. To offset this asymmetry, I think that sellers and especially buyers should utilize technology to look up any questions they may have prior to making a transaction. This way, they will come prepared and be able to thwart any unnecessary

So if the market isn’t affected by which way you obtain the information, why is one way illegal and the other legal when it is the exact same information?

It’s not a market with only one seller of a good. It has lots of buyers and sellers. So you would expect efficient outcome.

The question that was asked at the beginning of the study was, “When the typical person engages in a consumer transaction (usually as a buyer), does he or she try to avoid dealing with minority sellers, and does he/she treat minority sellers differently?”

Karl Otto Lagerfeldt: -now Lagerfeld because he has remove the t of his last name to make it sound more commercial in his diet book-is one of the most acclaimed fashion designers in the world known for his audacious designs and constant reinvention.

Financial markets are an important aspect of the Canadian economy, its main function is to provide a direct link between lender and borrowers. The market affects an individual 's personal wealth and the behaviors of business. The financial market has various problems related to information and the market channel that funds from the savers to investors would discourage economic efficiency. The lack of information is an issue that occurs within the financial market, but it is not the main problem at hand. The biggest problem the market faces occurs when one party in a transaction knows more than the other. The major problem with information within the financial market is called asymmetric information. It is academically defined as “a situation in which one party to a financial contract has much less accurate information than the other party” (Mishkin, Policy 218). These problems not only affect the financial market but it also in hand, affects the Canadian economy as well. The two main forms of asymmetric information problems are adverse selection and moral hazard, they are both major components that are directly linked to asymmetric information. In addition, even though conflict of interest is not a form of asymmetric information itself, it still affects the financial market and worsens the two major components as well. THESIS ABOUT WHAT THE PAPER IS ABOUT

In sport betting, information collected from previous results for a team can help to predict their future results. From this information, a punter can determine a favourable way to distribute their capital among available markets in order to maximise their wealth over a long period of time. The best strategy is called the log-optimal strategy and the first link between information theory and gambling was by Kelly [1]. An example of using side information to help predict the outcome of an event could be in a two horse race. Say a punter had insider knowledge that the favourite horse is in bad form in training due to a slight injury. This would make their price given by the bookies too short, and the other horses odds too long. They could then use this information to calculate how much of their capital they should bet in order to optimise their expected return from this race. A problem with this however, is that it is difficult to price up the true odds of the horse, which causes problems when trying to apply the Kelly Criterion.

Asymmetric information occurs when a buyer and a seller possess different information about an economic transaction. (Pindyck and Rubinfeld, 2013.p632). Being a ‘knock-on’ effect of asymmetric information, moral hazard is a situation when a party whose actions are unobserved can affect the probability or magnitude of a payment associated with an event. (Pindyck and Rubinfeld, 2013.p643). Through real life examples and case studies, this essay will evaluate deeper regions of moral hazard, whilst most importantly suggesting policies to limit its presence.

The price of commodity is determined by means of competition between buyers and sellers, and relation between supply and demand-offer and desire. Whoever offers the greatest advantage to purchasers is certain to drive the other sellers off the field and secure for himself the greatest sale. (Marx, p.5)

Purchase competition sometimes last for a certain period, especially when this commodity is very popular and the firm intentionally refrains from expanding its production. Such a case actually happens when queuing or long waiting time serves as a signal of high reputation. However, when all the goods markets are considered, purchase competition is observed only temporarily or only in a narrow field. In most cases, shops and warehouses of firms are filled with commodities ready for sales, and its facility operation rate is less than a hundred percent. As a result, buyers can feel certainty about purchases of most commodities within their budget constraints. Although transactions are reciprocal acts for both buyers and sellers, predominance of sales competition establishes a common thinking that the seller should be grateful to the buyer for completion of the transaction. This thinking is reflected in the custom that sellers say ‘thank you’ to buyers even when buyers says

Adverse selection describes the reversed situation. A buyer places an order in a dark pool and an equivalent seller puts a higher ask order. The implication will be that the buy is fully executed and unmatched demand of sell orders leads to depreciation of the share. In this case the buy side was adversely selected (ITG 2008). The issue with adverse selection is that it often remains undetected. The reasons are, that the buy side trader accesses dark pools often indirectly by banks and electronic dark boxes, hence it is difficult to track back the performance of each pool. That the size of dark pool orders are now days very similar (200- 500Shares) to those in displayed markets and orders are traded in a much higher pace. Moreover, brokers may not always willing to provide transparency on their own dark pools.

Information Asymmetry can be described as one side of a transaction having more knowledge of the product than the other. This could go both ways. The consumer may know more or the seller may know more. For instance, in the 70’s, the seller had a huge advantage over the consumer. Because of this, consumers were making purchase decisions that were very high in price. It was harder for the consumer to bargain prices back then because there was no way of knowing whether or not you were getting a good deal or being fed false information. Jumping back to today’s world, if a consumer is not sure whether or not they are getting a good deal or not, they may look up prices for the same product sold by a different merchant. Asymmetric information has a huge impact on decisions people make about where to purchase a product. But, even though this sounds like it only hurts the merchant, there is an advantage for the merchant. In today’s world we can obtain information from the customers.

According to Kim (2004), there are several instances that he has witnessed of the deceptive pictures presented in the websites of the online retail stores. The consumers correspondingly find a different product during the purchase of the product, which leads to extreme level of dissatisfaction from the customers end. Subsequently, the consumers find it difficult to purchase the product again from the same retail store. Lodorfos et al (2006) in this regard commented that the online retail organisations those have witnessed these sort of deceptive pictures in order to attract online consumers have ultimately not been able to retain the same. Similar instances are also notable among the consumers in Hong Kong, who are highly conscious regarding the quality aspects of a product. Therefore, it is eminent that deceptive pictures are regarded as one of the factors that restrict consumers in Hong Kong to purchase products through the online platform (Lodorfos et al, 2006).