THE ECONOMICS OF INFORMATION

IN ALL MARKETS PRICES CHANGE WITH VARYING FREQUENCY

“Search” : when the Buyer (or seller) would find the most favorable price canvass various sellers (buyers)

DISPERSION

PRICE

• MANISTATION OF THE “IGNORANCE” MARKET

• NEVER ABSOLUT HOMGENITY IN THE COMODITY

GOODS

• IN ALL TYPE OF GOODS

• ALSO IN HOMGENEUS GOODS

DISPERSION PRICE

• SERCH PRICE HAVE YIELD DIMINISHING

• BY EXPECTED REDUCTION IN MINUM ASK-PRICE

• EXPECTED SAVING MORE WHEN THE DISPERSION PRICE ARE MAXIMUM

COST OF SEARCH

• PROPORTIONAL NUMBER SELLERS

• MORE SELLER MORE EXPENSIVE SERCH BECAUSE MORE DISPERSION PRICECE

OPTIMUM AMOUNT SERCH

• COST OF SERCH IS EQUAL TO MARGINAL RETURN

UNIQUE GOODS

• EFFICIENCE SEARCH BULLER –SELLER IS VERY LOW

• THE POTENTIAL SELLER NO KNOWN THE COST OF SEARCH DIVIDES BY THE RACTION OF POTENTIAL BUYERS

ADVERTISING

MODERN METHOD OF IDENTIFYING BUYERS

AND SELLER

ADVERTISING IDENTIFICATION

(BUYERS & SELLERS) REDUCES DRASTICALLY THE COST OF SEARCH

SOLUTION: SPECIALIZED TRADER

INDEPENDENT ADVERTISED ITEM VALUE

EXPENSIVE

ADVERTISING LIMITATIONS

SERCH DETERMINANTS

UNIQUE PURCHASE:PURCHASES ARE

REPETITIVE

INITIAL SEARCH IS THE ONLY ONE THAT NEED BE UNDERTAKE

ASKING PRICES OF DEALERS IN

SUCCESSIVE TIME PERIODS IS PERFECT

THE FUTURE SAVINGS EXTENDING

OVER THE LIFE OF THE BUYER OR

SELLER

ASKING PRICES ARE UNCORRELATED IN

SUCCESSIVE TIME PERIOD

SAVINGS FROM SEARCH WILL PERTAIN ONLY TO

THAT PERIOD

SEARCH IN EACH PERIOD IS INDEPENDENT OF

PREVIOUS EXPERIENCE

CORRELATION OF SUCCESSIVE PRICES

IS POSITIVECUSTOMER SEARCH WILL BE LARGER IN THE INITIAL PERIOD

THAN IN SUBSEQUENT PERIOD

POSITIVE CORRELATION PRICE

HOMOGENEOUS PRODUCTS

GOODWIL: CONTINUED

PATRONAGE BY CUS- TOMERS WITHOUT

CONTINUED SEARCH

.

SOURCE OF DISPERSION:THE COST OF DEALER TO KNOW THE ASKING RIVAL PRICE

DISPERSION OF PRICES IS

CONTINUOS BECAUSE

KNOWLEDGE PRICE BECOMES

OBSOLETE

THE IGNORANCE TO CHANINGING

IDENTITY OF BUYERS-SELLERS.

BECAUSE THE FLOW A NEW

BUYER IN EVERY MARKET

WITHOUT INFORMATION

DISPERSION WILL ALSO

VARY: THE SIZE OF THE MARKE

COST OF COLLECTION OF

INFORMATION IS INDE- PENDENT

OF ITS USE TENDENCY TOWARD

MONOPOLY IN THE PROVISION

OF INFORMATION OF COMERCE

ADVERSTING: METHOD OF PROVIDING POTENTIAL BUYERS WITH KNOWLEDGE IDENTITY OF SELLER

NECESARY IDENTIFICATION SELLER: SELLERS CHANGES OVER TIME, BUT MUCH MORE BECAUSE OF THE TURNOVER OF BUYERS

BUYER WHO HAVE MORE INFOMATION / COMMODIT SERCH MORE

THE PROBLEM OF ADVERSTING IS THE BUYER PAY THE ADVERSTING PRODUCT PRICE. ITS DIFICULT INSERT “FREE” ADVERSTING BY THE SELLER.

THE SELLER COULD SERCH AND FIND THE SELLER WITHOUT ADVERSITNG COST PRODUCTOAND BUY MORE CHEPPER THAT PRODUCT

CONCLUSIONS…

IDENTIFICATION SELLER & THEIR PRICE ITS THE IMPORTANT ROLE OF SERCH INFORMATION

SOME ECONOMICS ORGANISATION WORK FOR ELIMINATING UNCERTAINTIES IN QUALITY. IT’S THE VALUE OF THE TRADE MARK “REPUTATION”

THE UNDERSTANDING OF ECONOMIC LIFE WILL BE INCOMPLETE IF NOT ACCONT WITH THE IGNORANCE PRICE

THAKS….

SEE YOU …..