The End of Asymmetric Information alex tabarrok
Citation (APA): riccardo-mariani@libero.it. (2017). The End of Asymmetric Information alex tabarrok [Kindle Android version]. Retrieved from Amazon.com
Parte introduttiva
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The End of Asymmetric Information By Alex Tabarrok and Tyler Cowen
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buyer and the seller have roughly equal knowledge.
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SEMPRE PIÙ
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access to the very best information when it comes to product quality,
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a large amount of economic regulation seems directed at a set of problems which, in large part, no longer exist.
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Used Cars
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t
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George Akerlof’s pioneering paper from 1970
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sellers have better information than buyers: sellers know the value of their car but buyers know only the value of used cars on average. Since buyers don’t know the quality of a seller’s car they will be willing to pay only the average value. But if buyers are only willing to pay for average quality, why would anyone want to sell a car that is of above average quality, a plum? When the plums exit the market, the average value of the used cars for sale falls even further and buyers are willing to pay even less. Following the logic, we end up with a situation where only a few lemons are bought and sold, thus the moniker “the market for lemons.”
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x CASO CLASSICO
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Even in 1970, the market for used cars was extensive,
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MA
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odometer.
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used by Alexander the Great to measure distances
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odometers were standard on almost all cars by 1925.
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used car prices are adjusted for mileage.
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odometer tampering illegal
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In 1972, for example, the Federal Odometer Act made tampering a federal felony.
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x ALEGGE
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Even more importantly, the Truth in Mileage Act of 1986 requires that sellers disclose and record the odometer reading on the title at every transfer of title.
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x ALTRA LEGGE
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Services such as CarFax collect and report odometer readings from title transfers and inspections, making the information easily available for a small fee.
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c
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market for used cars is already some three times larger than the market for new cars
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In 2012, for example, there were 40.5 million used car sales compared to 14.5 million new car sales (NIDIA 2013).
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x AMPIEZZA DEL MKERCATO
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There just aren’t that many lemons to sustain such a high transactions volume.
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Almost all vehicles today have “event data recorders” aka “black boxes,”
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Tesla, can collect such information remotely or stream it in real time.
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Tesla, for example, collects information on a vehicle’s odometer, service history, speed, location, battery use, charging time, braking, starting and stopping times, air bag deployment— even radio and horn use.[ 2] When a vehicle is sold the data transfers with the vehicle.
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x TELSA
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It is now possible to prove that a used car really was driven by a grandma just on Sundays.[
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these markets are thriving,
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What about the adverse selection argument as it applies to health insurance?
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t
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wearable sensors can monitor movement, heart rate, and heart rhythm, blood pressure and blood-oxygen levels, and glucose levels and other health-related statistics.
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x SENSORI
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make a good guess about an individual’s health.
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rates decline with the purchase of larger policies, which is the opposite of the prediction of the adverse selection model, namely that rates should increase with purchases (Cawley and Philipson 1999).
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x OPPOSTO DELLE PREVISIONI
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That can make some people’s insurance very expensive
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That is a very real public policy problem, but it is not well understood by invoking standard theories of asymmetric
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The cheap sequencing of the genome may accelerate and intensify these issues.
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each person will carry indicators of genetic information
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Moral Hazard
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t
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By moral hazard we mean the tendency of a better informed party to exploit its information advantage in an undesirable or dishonest way; for instance it is moral hazard when a worker shirks on the job or when a business enterprise takes too much risk at the possible expense of its bondholders.
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x DEFINIZIONE
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consumers insure their cars, but then drive recklessly,
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Deductibles have helped with this problem, but these days there are better remedies yet.
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data collected by Tesla
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...
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to share with insurance companies in return for lower rates.
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c
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Since 1996 all cars manufactured and sold in the United States must have a standardized On Board Diagnostic (OBD) port.
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Progressive Insurance offers “Snapshot,”
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One user, for example, reported:
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After my six month use of Snapshot, I’ve concluded that it’s most effective at helping drivers become more aware of their vehicle, driving conditions and slowing gracefully to a stop. It took me roughly a couple of months to retrain my driving behavior.
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x ATESTIMONIANZA
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Anyone can install Snapshot for 30 days and at the end of the 30 days receive an insurance quote.
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control not just drivers’ behavior but also that of the repair shops.
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With a Bluetooth connector to the OBD port a smartphone app can report fault codes, coolant temperature, fuel pressure, and many other performance characteristics in addition to speed, distance, location, and so forth. The extensive information from the car can be used to analyze and diagnose problems exactly as a mechanic would do.
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x MECCANICI
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If the mechanic says the car needs a new Johnson rod and the smartphone reports no problems,
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Reputation Mechanisms
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t
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Cheating becomes less valuable when the price is a loss of reputation.
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information technology has made it easier to observe a seller’s reputation
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Yelp, Angie’s List, and Amazon Reviews
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x ESEMPI
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it is not just sellers who are rated but workers too
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Early reputation mechanisms were one-way, namely that buyers would generate reputations for sellers,
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Many of the exchanges in the sharing economy, including Uber (transportation), Airbnb (accommodations), and Feastly (cooks) use two-way reputational systems. That is the customer rates the Uber driver, but in turn the Uber driver rates the customer.
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x TWO REP SYSTEM
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The Silk Road marketplace for illegal goods, for example, supported millions of dollars of exchange through a dual reputation system. On the Silk Road it was possible to pay for goods in advance of delivery or to buy goods which were delivered before payment was made. In each case, honesty was maintained through reputation even without legal recourse for contract breach.[
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x MALA
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lack of privacy.
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PROBLEMA
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it is easy to track where a driver goes,
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Our cellphones track our personal movements,
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If you have a criminal record, or have behaved badly
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this could mean too few chances to recover from mistakes.
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In a Bayesian world this makes no sense, but if people overreact
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a large class of people may find it difficult to find employment,
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Even when a privacy “opt out” is allowed, a problem remains.
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individuals who wish to keep more privacy often have to forsake the benefits of modern technology
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We can all think the trade-offs are worth it, “all things considered,” and still see problems
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possible that advances in cryptology may create reputation mechanisms that are compatible with the demand for privacy.
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reputation is compatible with anonymity
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(Camenisch & Lysyanskaya 2001, Androulaki et. al. 2008).
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SU
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You can buy and sell on eBay for instance, without having a publicly known name, and yet still reap the benefits of the modern reputation economy.
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x ESEMPIO
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Principal-Agent Problems
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t
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principals hire agents to produce output. Output is a function of agent actions and also noise.
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infer agent actions
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One simple solution to principal-agent problems is to reduce the information asymmetry
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UPS monitors the mechanical performance of all of its trucks and their location, speed, and braking behavior. UPS also knows every time a truck starts or stops, when a door is opened and closed, and whether a driver is wearing his or her seatbelt, among other pieces of information.
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x UPS
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savings of one minute per day per driver increases profit by $ 14.5 million over the course of a year.[
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UPS, the principal, knows more about the actions of its agents than the agents themselves.
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A random sample of teachers in India found that about a quarter are absent on any given day (Kremer et al. 2005). In a field experiment, Duflo, Hanna, and Ryan (2012) showed that requiring the teachers to take a picture at the start and end of each day showing themselves and their students reduced absentee rates by over 50%, with resulting significant improvements in child learning and achievement.
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x INSEGNANTI INDIANI E ASSENTEISMO
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India introduced a system that logs the entry and exit times of government workers. The system uses cheap fingerprint scanners to avoid cheating, and all of the information is publicly available in real time at http:// attendance.gov.in/. Currently, over 80,000 government workers in New Delhi are logged and another 35,000 are logged by similar system in the state of Jharkhand (http:// attendance.jharkhand.gov.in/).
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c
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police
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Inconsistencies between police reports and later discovered
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Many localities are now debating whether to require police to wear body cameras.
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reports of use of force fell by more than half
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Many “public choice” problems are really problems of asymmetric information.
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BUROCRAZIA
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they can claim to politicians that they need more resources
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customer service,
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One firm, for example, uses badges equipped with microphones, accelerometers, and location sensors to measure tone of voice, posture, and body language, as well as who spoke to whom and for how long (Lohr 2014). The purpose is not only to monitor workers but to deduce when, where and why workers are the most productive.
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x CONTROLLARE I TELEFONISTI
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When employers do not easily observe workers, for example, employers may pay workers unusually high wages,
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those higher wages involved a cost, namely that fewer workers were hired,
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Better monitoring of workers will mean that employers will hire more
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Escrow Systems, Artificial Agents and Malleable Memory
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even a bid or ask can reveal information the trader doesn’t want revealed.
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COSTI TRANSAZIONE
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A simple but telling example is the expression of interest in dating another person. Revelation of interest can be uncomfortable, especially as it may not be reciprocated. Phone apps like Tinder allow users to express interest in other users, but the users are not able to contact unless both express an interest in each other. In this case, the double coincidence of wants is not a problem but a feature.
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x TINDER APP. APPUNTAMENTI
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Arrow (1963)
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GIÙ
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difficult for the buyer to know the value of the information without knowing the information itself.
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escrow system can solve
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making the exchange if and only if the third party judges that the buyer would value the information at more
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Two difficulties
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the third party must be trusted
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1
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the third party must be trusted to accurately represent the buyer
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2
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Both of these problems can be solved by making the third party an artificial intelligence.
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t
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Conclusion
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the costs of a political system that produces many new regulations but repeals very few old ones.
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regulatory apparatus is increasingly out of date.
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Symmetric Information Won’t Be Perfect By Alex Tabarrok
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t
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Andrew Thomas’s life insurer knows exactly when he arrives at his local gym. The company is notified when he swipes his membership card, and 30 minutes later, it checks that he is still there, tracking his location through his smartphone. The insurance company has a vested interest in keeping Mr. Thomas alive and well. In return for sharing his exercise habits, his cholesterol level and other medical information, Mr. Thomas, a 51-year-old medical publisher who lives in Johannesburg, earns points, which translate into premium savings and other perks.
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x UNA STORIA DI ASSIC. FINE ASIMMETRIA
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The second example was the killing of Walter Scott by a police officer. After a cell phone video of the shooting surfaced, the claims of the officer were quickly shown to be false. Not long ago this major injustice would probably have been a neglected police report. Today it is a national scandal likely leading to greater adoption of police body cameras.
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x STORIA DI ABUSI DELLA PULA
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the opposite of asymmetric information is symmetric information, not perfect information.
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t
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Information will always be imperfect.
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We don’t even have perfect information about our own tastes.
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Rolls-Royce, the British manufacture of jet engines, for example knows so much about how and when its engines are being used that it makes most of its money not by selling engines but by renting them by the hour, along with a promise to maintain and replace any engine that breaks down.
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x ESEMPIO ROLLS ROYCE
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rental contracts already exist for consumer durables such as automobiles, and we predict they will become more attractive
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number of commentators pointed to extensive price discrimination as contradicting our argument.
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more information on the seller side can lead to more price discrimination,
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There is no necessary contradiction,
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Joshua Gans and a number of others suggest that we are predicting or promoting the end of regulation. But that is a misreading.
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ingredient labeling have had benefits, albeit small ones.
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ES REGOLA UTILE
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government regulation which helps buyers and sellers to make better choices is superior to government regulation that prevents choices.
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x PRINCIPIO
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consider the Food and Drug Administration’s (FDA) regulation of pharmaceuticals.
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ES DI VIOLAZIONE DEL PRINC
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banning products unless they pass a one-size-fits-none rule,
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information argument has been used far too often to protect rents, including the protection of physicians and dentists
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We pointed to reviews, ratings and recommendation systems as new sources of information to overcome moral hazard problems.
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these systems are themselves subject to attack and manipulation
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there is no theorem in economics that says that every action creates an equal and opposite reaction.
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3 steps forward and 1 step back.
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SIMMETRIA
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If reviews were so gamed as to be useless, for example, people would stop using them and services like Airbnb
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Yet we don’t expect services such as those offered by Airbnb, Yelp, and Angie’s List to shut down anytime soon.
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If the amazing proliferation of information, monitoring, and quality evaluation in recent times does not render at least some regulation obsolete, or in need of revision, than what kind of information developments might do so?
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x DOMANDA DA FARSI
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a) information asymmetries are diminishing significantly, and b) the nature and extent of government regulation really does need to change.
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x RISPOSTA
