ECO 304K Chapter Notes - Chapter 11: George Akerlof, Conspicuous Consumption, Adverse Selection
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ECO 304K Full Course Notes
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Document Summary
Most people think only producers/wholesalers are worth buying from: lots of people avoid going through retailers/paying for services of the middle man. But, both the middle man and the wholesalers have the same economic role: the world is full of incomplete information, sales agents/middle men increase the extent to which goods find consumers who value them the most. More information is better than less information: getting information can be costly. After a certain point, the value of new information will begin to decrease. Low hanging fruit principle tells us that people will gather info from the cheapest sources first: as the amount of information somebody has grows. Marginal cost of info goes up: when cost of getting the info > gain in value of info, people are better off remaining ignorant to the information. Expected value of a gamble: (sum of all possible outcomes of a gamble) multiplied by (each outcome"s respective probability)
