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This can help to alleviate the asymmetry of information between them. If sellers do that consistently, then buyers will gain trust in the sellers that price is in fact related to quality. When that happens, the market can function because buyers can be fairly certain of their utility.
What this refers to is the cost of dishonesty. In used cars, dishonesty will drive away business, so any car lot with an interest in long-term success must ensure that the costs of dishonesty are reduced by reducing dishonesty itself. He then likens the lemon market to the cost of doing business in a country with high levels of corruption. Firms are discouraged from investing in places where information asymmetry means that they cannot distinguish between a good business opportunity and a scam. Thus, again, encouraging a lack of corruption would be the best pathway to successful business promotion, just as it is on a used car lot.
Conclusion
Akerhof shows with the used car example how high the costs of dishonesty can be. For those in public policy or in business, this is an important finding. When dishonesty is likened to information asymmetry, the...
He argues that if honesty is implemented, the market will grow stronger.
As consumers trust in the used car lot, or industry for that matter, they are more likely to buy. In response to this reality, the industry has focused on building a link between price and quality. The price signals the quality to the consumer. Without that link, the consumer would not be able to differentiate between a high quality vehicle and a low quality one. The result is market failure. When the link is created, consumers can trust that an expensive vehicle is a high cost one, and a cheap vehicle is a low cost one. This creates enough trust to have a functioning market for used cars.
When applied to developing nations, it becomes clear that there are high costs associated with corruption, primarily in lost business. Any firm that cannot protect its interests in some way will not enter the market, for fear of being ripped off. Remove this fear and you remove a significant barrier to investment. A more robust environment would emerge.
Economic Growth and Happiness Economic Growth Can Lead to Healthier and Happier Societies More Availability of Goods Higher Income Increase in Tax Revenues and Better Welfare Programs. Increase in Purchasing Power Technological Advancement Health Industry Benefits Business Sector Benefits General Benefits Reflective statement Economic Growth Can Lead To Healthier and Happier Societies Economic growth has long been termed as the precursor to any society's success, and in this paper, we shall be looking at various aspects of economic growth that are directly
" The foremost risk involved with implementation of the innovation is its rejection and for that matter, its failure. What if it does not work? What if it is not accepted? What if a better alternative is available? What if it is not cost efficient? What would be the correct and most suitable time to make the innovation public? There are many such questions associated with the implementation of innovation process. The risks involved are, namely,
Although intranet pages may provide links to the Internet, an intranet is not a site accessed by the general public" (Housel and Hom, 1999). Aside from the intranet, the company also uses a wide array of anti-virus programs, firewalls and virtual private networks. The scope of these software applications is that of screening the information which flows between all the organizational computers (Answers, 2011). At the level of the organization,
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Business Ethics Palmeri, C&Rupp, L 2013, May 3, Disney Bangladesh Exit Pressure on Clothes makers Who Stay, Retrieved from http://www.bloomberg.com/news/2013-05-03/disney-bangladesh-exit-puts-pressure-on-those-who-may-stay-1-.html The work of Palmeri and Rupp (2013) is focused on highlighting the issues faced by the multinational organizations while operating in developing markets. It is highly likely for large organizations to develop their overseas presence. However the economically developing markets a number of issues including environmental, infrastructural, and compliance with health and
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