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It sounds nice in principle. But often low quality services will lie about being high quality services, and there's not much recourse once you've paid. Thus I
by ahepp 6y ago
It sounds nice in principle. But often low quality services will lie about being high quality services, and there's not much recourse once you've paid.
Thus I have found myself participating in the race to the bottom, not because I'm per se unwilling to pay for quality, but because I am required to trust that the quality difference exists, while the money saved is certain.
- Viliam1234 6y agoThis is called https://en.wikipedia.org/wiki/The_Market_for_Lemons https://en.wikipedia.org/wiki/The_Market_for_Lemons The same principle, only applied to selling cars: > Suppose buyers cannot distinguish between a high-quality car (a "peach") and a "lemon". Then they are only willing to pay a fixed price for a car that averages the value of a "peach" and "lemon" together (pavg). But sellers know whether they hold a peach or a lemon. Given the fixed price at which buyers will buy, sellers will sell only when they hold "lemons" and they will leave the market when they hold "peaches". Eventually, as enough sellers of "peaches" leave the market, the average willingness-to-pay of buyers will decrease (since the average quality of cars on the market decreased), leading to even more sellers of high-quality cars to leave the market through a positive feedback loop. Thus the uninformed buyer's price creates an adverse selection problem that drives the high-quality cars from the market. Adverse selection is a market mechanism that can lead to a market collapse.