The tremendous growth of E-commerce during the last century could baffle some economist. The market space in the last decade has made a major improvement. In the first few years, we were seeing the growth of search engines and portals. This is when the Business to Consumer market began to increase. Over the last couple years, the Business to Business market has shown significant growth. To answer any predetermined questions, we will discuss important impacts of information asymmetry in business.
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.