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Strategies for a discontinuous future.












Tuesday, October 21, 2003
 


Interestingly, used-cars get sold over the web better than without it. Why is this interesting? Well, the canonical example of adverse selection and asymmetrical information is used cars - you don't know if you're buying a lemon until after you've bought it. The Net has actually changed the dynamics of this market, by reducing information asymmetries between buyers and sellers.

I think this is because buyers have access to tons more info about the detailed histories of individual cars, general history about models and reliability, and crucially, much, much lower search and transaction costs, because competition for buyers is much more intense. In short, buyers can match prices to value more effectively, driving lemons out of the market. Fascinating.

-- umair // 6:20 AM //


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