Tag Archives: economics

Standardizing Garbage – The Problem of Adverse Selection

$1 chicken sandwiches, there are no secrets here

$1 chicken sandwiches, there are no secrets here

The next McDonald’s marketing campaign should be,”Guaranteed: The same shitty food that makes you fat and crap customer service Nationwide!”

There is nothing like a local burger, the local coffee shop can be exceptional. The problem is, you have to take risk to go- consumers have a known quantity in the chain restaurant or box store.

Customers keep going back to chains because they know what is coming.

Here is the rub, we [customers] might know the food is terrible [McDonalds] but we drive past the local place in order to avoid the surprise – be it good or bad.

It’s an abusive relationship.

As frustrating as this is, don’t blame yourself- it is a real theory of economics.  Adverse selection refers to a market process in which undesired results occur when buyers and sellers have asymmetric information (access to different information).  The crappy products or services are more likely to be selected- I’m over simplifying but you get it.

Next time you’re tempted to stop at McDonalds or go to Crapmart just because you know what you’re going to get, roll the dice and be surprised.

Contributing to our society; One Google review at a time

Mike’s pizza deserves more great reviews.

I read internet customer reviews before I buy something or go somewhere.  My wife reads them even more.  I post reviews on Google, when a business strikes me as very good or bad.  I should post more reviews on Amazon about the products I buy.

There is value in these reviews.  This is the power of the internet.  Anyone, anytime can post what they think about a product.  The most helpful reviews are cheered by other customers while the least helpful fall to the bottom.

This is good right?  This is increased access to information so that the customer can make informed decisions.

The economic law of supply and demand depends on the supplier and buyer having equal information about the good.  The opposite is called ‘information asymmetry.’  This condition is said to cause market failure.  Google it, it’s interesting.

Bad guys are creating asymmetry on purpose.

What if an author or publisher hires a company to post hundreds of positive reviews of their book on Amazon?  What about a product?

There are no laws against being shady and unethical.  It usually hurts your brand though.

The company, Reputation.com promises, “We don’t actually delete any webpages (only the person who posted [a bad review or negative content] can do that), instead we simply make unwanted pages about your business rank lower in search results so that virtually no one ever sees them.”

So, I guess the story goes if you are a shitty doctor or a restaurant with poor service and have earned some bad customer reviews, you can hire reputation.com to make them ‘go away?’

That’s weak.

Let’s do our part and post quick reviews on Google and Amazon when we buy something or go somewhere…the market…no, our society depends on it.

Ok, maybe not our society.