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That in a voluntary trade where both parties are informed, each side walks away better off.

Or at least each side thinks it is better off (otherwise, obviously, they wouldn't do the trade). They might not actually be.”


Regarding both mutually beneficial transactions, I’ve recently made some purchases off of Craigslist, a couple of bikes for my kids, and these recent experience caused me to reflect on the nature of exchanges.

As I finished one transaction, I was thinking about how the whole exchange was rather awkward. The guy who sold me the bike seemed rather uncomfortable. His awkwardness made me start to question the transaction. But since it was a bike, I could easily check it to make sure it was worth paying for.

Having the ability to return a product or write a letter of complaint to a manager are two features you lose when making an exchange via this website. Ebay’s rating system, to a degree, added some accountability to sellers and buyers. No such thing for Craigslist.

I know there is a concept called information asymmetry, which refers to one party having an information/knowledge advantage in a transaction.

This is often said to characterize the patient/doctor relationship.

I recently read a book on the US health care system and the author ( spent some time trying to argue that while consumers are often (almost always?) less knowledgeable than their doctors, they still are sophisticated enough and have enough tools at their avail to make informed decisions. I am not so sure.

I know when a mechanic, especially one I do not know very well, suggests a repair I am quick to delay making a decision. I try to ask people I know about the repair and I often look online for additional information.

If I had to make more health care payments out of pocket, I would have to behave similarly, although I am not sure I would. I understand how detaching the consumer from having to directly pay for health care increases demand for health care, creating a "free good" mentality.

But, at the same time, it seems that the health care market is ripe for market failure due to asymmetrical information.
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