Some Markets Have Some Bazaar Items for Sale

John McMillan's fourth chapter of Reinventing the Bazaar: A Natural History of Markets is a fascinating chapter about the correlation between the spread of information and economics.

a. The passage I found most interesting was about how, in India, vendors would water down their milk and how this caused a 25% decrease in sales. Because it was impossible for the average consumer to tell the quality of the milk they were purchasing, they were not sure if the milk they were purchasing was good quality or bad. This lead the consumer to only want to pay a small amount for their milk, they just had to assume most of the vendors were selling bad milk. This lead to all of the vendors that were selling good milk to go out of business; receiving the bad milk's pay for their milk wasn't enough to keep them open. This lead to 100% of the vendors selling bad quality milk. This apparently happens a lot in India, there are tons of bad quality goods that could even poison the unlucky consumer. I found this fascinating.

b. Transaction costs are any cost that come from shopping within a market. These include the actual price of the item, along with hidden costs, like time and effort. An example of this is trying to find a job. Because searching for a job is very time consuming and requires a lot of effort, unemployment becomes an issue; it's not because there aren't any jobs, it's because you may take a week to apply to five jobs that fit you, only to be rejected and have to start over. You could be doing other things instead. The 'transaction' of getting a job has tons of transaction costs.

c. Imperfectly distributed information leads to overpricing of goods. Because you do not know you can get the same quality (or even a better quality) good for cheaper, you will be more inclined to pay more because the search costs to find these items may make them more expensive. This discrepancy helps the seller of the good because they are able to charge above market price for a good and hurts the buyer. The lack of information also leads to an inefficient market because transactions can occur between the wrong people, you may end up buying something that is not as suited for what you need compared to another product in the market, or not even happen if the search costs are too high.