If you’ve ever wanted to buy something second hand, its probably because its caught your eye. But should you go forth and buy that product?
Probably not.
This is on the basis that you do not have enough or perfect information about the product that is being sold. We call this information asymmetry. This creates an imbalance of power in transactions which can sometimes cause the transactions to go awry.
Because you do not have complete information you do not know the true value of the product your purchasing. Lets say your buying a second hand car, and the salesman is asking for £2000. Perhaps he hasn’t told you that the alternator in the car is faulty. Had you known this information beforehand you may have devalued the car (to £1500) or maybe not even bought it.
So when making purchases ask questions…lots of questions. Try educatiing your seller on the economics of information failure…or just go with your gut instinct!
If it looks to good to be true it probably is.
