ECON-1006EL Chapter Notes - Chapter 11: Marginal Utility, Marginal Cost, Risk Neutral
6 Dec 2016
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Up to now, we have assumed that all buyers and sellers in a market possess perfect information. of course, no one is ever perfectly informed about anything. Investment in information: how an intermediary adds value. One of the most common problems consumers confront is the need to choose among different versions of a product whose many complex features they do not fully understand. If you are a consumer who does not know which is the right product for you, the extra expense of shopping at a specialty retailer may be a good investment. Spending on the right product is better than on the wrong one. In most situations, the value of additional information, given that one already has acquired some information, will decline beyond some point. The cost-benefit principle tells us that a rational consumer will continue to gather information as long as its marginal benefit exceeds its marginal cost.
