Chapter 4: "Information Wants to Be Free"

   A passage I found interesting was the quote by Kenneth Arrow in which he states, the "biggest new concept in economics in the last thirty years, is the development of the importance of information, along with the dispersion of information." I found this interesting because in markets today, I feel that technology is taken advantage of. It is hard to imagine not whipping out my iPhone and searching the price of an item I'd like to buy. It is beyond easy to compare prices of the same or similar items on several different websites at once. While in a store, its simple to check if the price of a desired good is less at another location. As Arrow stated, the last thirty years have made these actions easy. Before the fast and easy "dispersion of information" that we are used to today, there were many more costs when it came to finding the best price for a desired good. It took a great amount of time traveling from market to market, comparing prices, whereas today, it takes the click of a button.

   According to McMillan, transaction costs refer to what the consumer loses while searching for the item they desire. As mentioned above, time is a big transaction cost or specifically, a search cost. The time spent searching for the item and comparing prices from place to place or vendor to vendor, could be spent doing other things. If one decides to not spend the time searching for the best price or item, they could end up paying way more for the item than they necessarily need to.

   Imperfect information can rise to numerous issues. Assuming everyone knows the price of the item at each place it's being sold can lead to sellers underpricing the item. On the other hand, if the seller believes that costumer will not spend time searching for the best price, they are likely able to sell an item at a higher price than other locations. As mentioned in the chapter, some vendors, especially in typical old markets, have loyal customers who they trust to come back and buy consistently. In that case they may keep prices steady for that person but get more profit from a new costumer, like a traveler for example. The quality of the product is likely to be of greater knowledge to the seller, therefore they are able to determine the price, at the expense of the costumers knowledge. However, if the seller informs the costumer of the true quality of the product, the costumer may decide to buy elsewhere, affecting the seller.