- Thread Starter
- #21
Used cars are a go-to example for Asymmetrical Information, although now you can order a VIN report in the US and know the crash history and get a sense of maintenance. In the old days, only the used car salesman and his mechanic knew. This is why they have such a great reputation - hard to resist taking advantage of it, especially when your continued employment depends on it.
I had a back-and-forth in another thread with..was it @BDWoody ? About extended warranty. That's another case where the vendor/manufacturer have a pretty good idea of the probability of an insured problem, and you don't. Then they take advantage of your loss aversion to sell you an overpriced policy (almost entirely). Now, Woody (if it was him) claimed the seller didn't know his kids and their destructive tendencies. True! All they need to know is that there aren't too many customers with such kids *on average* to still make a profit selling extended warranty. With N=1, anything can happen. Of course, most warranties don't cover abuse, so that's another thing.
Are lottery tickets asymmetry? The odds are published and figurable. But buyers are rarely equipped with the skills to calculate the odds, let alone to understand (grok?) how small a really small number is (or how big a really big number is). Inability to deal with very large or small quantities is another known behavioral bias.
I had a back-and-forth in another thread with..was it @BDWoody ? About extended warranty. That's another case where the vendor/manufacturer have a pretty good idea of the probability of an insured problem, and you don't. Then they take advantage of your loss aversion to sell you an overpriced policy (almost entirely). Now, Woody (if it was him) claimed the seller didn't know his kids and their destructive tendencies. True! All they need to know is that there aren't too many customers with such kids *on average* to still make a profit selling extended warranty. With N=1, anything can happen. Of course, most warranties don't cover abuse, so that's another thing.
Are lottery tickets asymmetry? The odds are published and figurable. But buyers are rarely equipped with the skills to calculate the odds, let alone to understand (grok?) how small a really small number is (or how big a really big number is). Inability to deal with very large or small quantities is another known behavioral bias.