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Any suggestions on how consumers,know themselves? In standard models with assymmetric information, the parties involved are...

Any suggestions on how consumers,know themselves? In standard models with assymmetric information, the parties involved are assumed to have private information about their own characteristics. In the health insurance market, for example, customers are typically assumed to know more about their health status than insurers do and if the customers use this information in deciding wether to buy insurance, we have a classic case of adverse selection

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Modern information processing technologies are making sellers know more about the purchasing behavior of the consumers.This makes the seller better its services and also giving suggestions like if the customer favors a book or a movie ,he might also favor X.But this might lead to disproportion information in which the seller knows more about the habits of consumer than the consumer knows about himself.Again the information gathered may be useful to the seller in making special offers which will be overestimated by the consumers.This is known as adverse targeting.Modern technologies also make consumers better shoppers if firms give machine readable data.Consumer Expenditure Conditional on Prices or RECAP regulation helps consumers in finding out which firm sells cheap products and consumers can be saved from abusive pricing.Regulators should try to make markets transparent.

Rahul Sunny answered 2 years ago
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