Question

Imperfect information is pretty common. Many people who got caught up in variable interest mortgages claimed not to know the interest rates would go up after a few years. Many people have been defrauded in Ponzi schemes. Not too long ago a poor elderly lady was discovered to still be paying $3.00 a month to rent her phone from AT&T, something that was done way back in the 70s and before when you could not own your own telephone. One recent scam that has surfaced is people calling to help unknowing suspects to sign up for Obama Care and getting payments, which is stolen money. Another is people calling and claiming the person missed jury duty and demanding money to pay off a fine. Do you know anyone that has been defrauded or suffered simply because they did not know what they were doing? Discuss.

Answer 1

All frauds occur due to imperfect information, which could be due to lack of alertness, lack of knowledge, lack of precaution, and so on.

As most payments are digital nowadays, fraudsters also attempt to utilize the digital channel.

For example, Mr. A is 65 years old. He receives a phone call from a person claiming to be from his bank, and mentioning that Mr. A needs to provide some information over the phone. Under the pretext of basic demographic information, sensitive information about government IDs is also extracted. The "bank employee" also asks for a one-time password received on Mr. A's mobile phone. Mr. A trusts the person, and within a matter of seconds, Mr. A's bank account is emptied.

In another example, Mrs. B is a housewife, who visits a reputed jeweler, with some of the 24 carat gold ornaments gifted by her mother. She would like to utilize the older gold, to make some new ornaments. The jeweler agrees to use the old gold, but asks her to purchase new gold as well, as the ornament requires more raw material. After a few days, she gets her new ornaments. Out of curiosity, she gets them tested for purity at another jeweler. She finds out that the new ornament has only 14 carat gold.

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Thus, there are many ways through which lack of information and awareness can create problems in economic transactions.