Since your preferred explanation does not require anything beyond ordinary ignorance, I don’t see how you can claim that this phenomena requires us to postulate such a thing. I think you should try to get a little more formal with your analysis.
I can’t parse this—Robin seems to be saying that David is saying that, if Robin thinks that “abusive terms” should be allowed in credit card contracts because they are mutually agreed to, that this requires Robin to postulate “such a thing”, where “such a thing” is, um, something beyond ordinary ignorance. I can’t resolve which claim of David’s Robin is referring to when he says David claims Robin must postulate this thing.
I don’t see the point of contact with the argument. Or an answer to the direct question as to whether the problem is asymmetric information.
I would think that, if Robin believed the problem was asymmetric information, that would not require anything beyond ordinary ignorance. Since he ascribes that explanation to David, I infer that Robin does not believe the problem is asymmetric information.
The models I have in mind are the standard “lemons” adverse selection model and other models in which one side doesn’t know something important about the other side’s attributes, for example a government purchaser who doesn’t know if a particular contractor has high costs or low costs. In the lemons model, the market unravels partially or entirely. In the other models, the agent that knows its attributes can earn some “information rents,” which are necessary to get the low-cost agents to reveal the fact that they are low cost. In these models, the uninformed agent does not simply proceed as if it didn’t know it was uninformed, the equilibrium outcome is a product of the fact that both sides know that one side is uninformed. When these models apply, remedying the information asymmetry solves the problem directly. I don’t see how they apply to credit card contracts and other similar examples. Are you saying that they do?
Since your preferred explanation does not require anything beyond ordinary ignorance, I don’t see how you can claim that this phenomena requires us to postulate such a thing. I think you should try to get a little more formal with your analysis.
?
I can’t parse this—Robin seems to be saying that David is saying that, if Robin thinks that “abusive terms” should be allowed in credit card contracts because they are mutually agreed to, that this requires Robin to postulate “such a thing”, where “such a thing” is, um, something beyond ordinary ignorance. I can’t resolve which claim of David’s Robin is referring to when he says David claims Robin must postulate this thing.
I don’t see the point of contact with the argument. Or an answer to the direct question as to whether the problem is asymmetric information.
I would think that, if Robin believed the problem was asymmetric information, that would not require anything beyond ordinary ignorance. Since he ascribes that explanation to David, I infer that Robin does not believe the problem is asymmetric information.
The models I have in mind are the standard “lemons” adverse selection model and other models in which one side doesn’t know something important about the other side’s attributes, for example a government purchaser who doesn’t know if a particular contractor has high costs or low costs. In the lemons model, the market unravels partially or entirely. In the other models, the agent that knows its attributes can earn some “information rents,” which are necessary to get the low-cost agents to reveal the fact that they are low cost. In these models, the uninformed agent does not simply proceed as if it didn’t know it was uninformed, the equilibrium outcome is a product of the fact that both sides know that one side is uninformed. When these models apply, remedying the information asymmetry solves the problem directly. I don’t see how they apply to credit card contracts and other similar examples. Are you saying that they do?