What Do We Pay For Asymmetric Information? The Evolution Of Mechanisms In Online Markets
Source: Munich Personal Repec Archive
The appearance of the Internet reduces transaction costs greatly, and brings the boom of online markets. While the authors are trying to regard it as the most realistic approximation of perfect competition market, the asymmetric information and a series of problems caused by it stop them from dreaming. As the old saying goes, there is no free lunch. This summer witnessed the collapse of the reputation system in Taobao, the biggest online transaction website in China. In fact, during the evolution of mechanisms in online markets, reputation, punishment and barriers to entry have been established in turn.