"How information asymmetry is possessed by economy as the most powerful, dominating tools, which makes an imbalance, awry in transactions."
Can Information Asymmetry be Good?
What happened is that the Power Balance Company, magical wristbands producer, which stated that it enhance your power and balance it turned out to be fiction. What makes it seemed illogical is because people keep questioning, “Does it proved scientifically?”, “How does the mechanism in human body, changed with a magical wristband with magical holograms”?
According to the owner as quoted by -http://www.gravity-engine.net/power-balance wristbands-are-scam, here is the statement:
"In our advertising we stated that Power Balance wristbands improved your strength, balance and flexibility.
We admit that there is no credible scientific evidence that supports our claims and therefore we engaged in misleading conduct in breach of s52 of the Trade Practices Act 1974.
If you feel you have been misled by our promotions, we wish to unreservedly apologize and offer a full refund."
Where is the information asymmetry here? The information asymmetry is when only producers knew that their product was nothing more than a wristband, nobody knows the truth of this. Simple, but so unethical, isn’t it?
Another case is from one of the most watched movie in 2011, The Harry Potter and the Deathly Hallows which is based on its novel. The advertisement of the later book of Harry Potter will use the asymmetric information as their marketing strategy. The producer spread a rumor in the early 2000 for it became an impact in the late same decade.
At first, it began where the next novel of Harry Potter, rumored to be published in only limited edition, in the middle of the night, and only sold in some bookstores. This was due to the content of the book and was specially requested by its author, J.K Rowling. Actually the major purpose was to increase its free advertising and create a buzz among fans and ordinary people. Thus, as soon as people began to believe it, people queue in that many bookstores, worse, people built a camp and stayed over in front of the bookstores with the hope to buy ‘the limited edition of Harry Potter Novel”.
A few weeks later, people figured out that more books were coming and there was no connection between the story and the fact that its first sale must be done in the middle of the night. They realized that the book wasn’t a limited edition book. But this strategy had successfully create curiosity amongst people who later voluntarily queuing for many hours for the book that they could have comfortably in the next morning. Is it ethical then? Where is the information asymmetry here?
The information asymmetry is clearly stated, when people figured out that the book wasn’t a limited edition, its number more than enough to serve the market. Those cases above are examples of the power of information asymmetry.
With many examples this writing has presented, do you think it’s ethical? Who benefits the asymmetric the most, consumer or producer? At this point you might agree with me that the one who benefits from this situation, is the one who have more information. In business, it might be the producer, or the trader. The reason of this proposition can be taken in our daily life. In all aspects of life, when two people are dealing with each other, both sides must take the same level of benefit. One might not abuse the information they have for their own benefit or worse to make other people suffer. Only then, it becomes ethical.
The good news is, we don’t have to be paranoid with asymmetric information. Thanks to the technology development. Nowadays, technology changed rapidly, especially in media and communication. Innovations of Communication and Information Technology are always better. One of the most powerful of the said innovations is internet. With this new technology, people can get connected and exchange information easily. Before purchasing a product, they can surf the net, compare the price, or ask people that they don’t know through forum, chatting, social network or tweeting. Internet made birth of the most powerful search engines, such as Google and Yahoo! These search engines choose the best and probably the most clicked link by people. The major purpose is to show people, the best and most preferred sites for us, showing us what are we looking for. These make us well informed before we make decision.
It is now your choice; to keep yourself well informed or become the next victim of Asymmetric Information.
According to the owner as quoted by -http://www.gravity-engine.net/power-balance wristbands-are-scam, here is the statement:
"In our advertising we stated that Power Balance wristbands improved your strength, balance and flexibility.
We admit that there is no credible scientific evidence that supports our claims and therefore we engaged in misleading conduct in breach of s52 of the Trade Practices Act 1974.
If you feel you have been misled by our promotions, we wish to unreservedly apologize and offer a full refund."
Where is the information asymmetry here? The information asymmetry is when only producers knew that their product was nothing more than a wristband, nobody knows the truth of this. Simple, but so unethical, isn’t it?
Another case is from one of the most watched movie in 2011, The Harry Potter and the Deathly Hallows which is based on its novel. The advertisement of the later book of Harry Potter will use the asymmetric information as their marketing strategy. The producer spread a rumor in the early 2000 for it became an impact in the late same decade.
At first, it began where the next novel of Harry Potter, rumored to be published in only limited edition, in the middle of the night, and only sold in some bookstores. This was due to the content of the book and was specially requested by its author, J.K Rowling. Actually the major purpose was to increase its free advertising and create a buzz among fans and ordinary people. Thus, as soon as people began to believe it, people queue in that many bookstores, worse, people built a camp and stayed over in front of the bookstores with the hope to buy ‘the limited edition of Harry Potter Novel”.
A few weeks later, people figured out that more books were coming and there was no connection between the story and the fact that its first sale must be done in the middle of the night. They realized that the book wasn’t a limited edition book. But this strategy had successfully create curiosity amongst people who later voluntarily queuing for many hours for the book that they could have comfortably in the next morning. Is it ethical then? Where is the information asymmetry here?
The information asymmetry is clearly stated, when people figured out that the book wasn’t a limited edition, its number more than enough to serve the market. Those cases above are examples of the power of information asymmetry.
With many examples this writing has presented, do you think it’s ethical? Who benefits the asymmetric the most, consumer or producer? At this point you might agree with me that the one who benefits from this situation, is the one who have more information. In business, it might be the producer, or the trader. The reason of this proposition can be taken in our daily life. In all aspects of life, when two people are dealing with each other, both sides must take the same level of benefit. One might not abuse the information they have for their own benefit or worse to make other people suffer. Only then, it becomes ethical.
The good news is, we don’t have to be paranoid with asymmetric information. Thanks to the technology development. Nowadays, technology changed rapidly, especially in media and communication. Innovations of Communication and Information Technology are always better. One of the most powerful of the said innovations is internet. With this new technology, people can get connected and exchange information easily. Before purchasing a product, they can surf the net, compare the price, or ask people that they don’t know through forum, chatting, social network or tweeting. Internet made birth of the most powerful search engines, such as Google and Yahoo! These search engines choose the best and probably the most clicked link by people. The major purpose is to show people, the best and most preferred sites for us, showing us what are we looking for. These make us well informed before we make decision.
It is now your choice; to keep yourself well informed or become the next victim of Asymmetric Information.
Copyright © 2011 Ionwyn Sean
