McMillian Chapter 4

Reinventing the Bazaar by John McMillan

Chapter Four: Information Wants to be Free

I can honesty say I cannot imagine a world without the internet. The internet is a major part of my day to day life, I use it for homework, to buy books and other miscellaneous items and to find the strangest facts. Information has always been free to me because libraries and Wi-Fi are everywhere. It was interesting to read that Trucker Richard Kirschman was the first trucker to carry a laptop and that he helped a fellow trucker find a load to carry back home. The easy access of information helps businesses to grow, I just assumed that everyone, especially truckers, are always able to access information freely.

Apparently, the level of functionality and prosperity of markets depend on the flow of information. In chapter four, McMillan says, "It [information] wants to be expensive because it can be immeasurably valuable to the recipient." The lower the cost of information, the lower the selling prices are, which is good for the consumer, but it decreases the profit for the supplier. Prices can remain high when the consumer is lacking the necessary information. The flow of information greatly impacts search costs and transaction costs. Search costs  refers to "the time, effort, and money spent learning what is available where for how much." Transaction costs refers to "the cost of shopping around," which can prevent competition in the market. McMillan uses the process of buying a brass urn sold by many producers. People will search for a seller that will sell a brass urn at a lower price than everyone else; if the seller does cut the price and information is free, then the seller can receive a boost in sales. Transaction costs also refers to "evaluation costs", which is basically the buyers ability to determine the quality of the product. In the process of selling a brass urn, the quality of urns being sold can vary from seller to seller, but if the buyer can not tell which is the best, all prices can be marked up.

"Information is the lifeblood of markets", when information does not flow markets cannot function properly. If information does not flow properly, sellers can oversell their products and buyers will lose because they are being cheated. If the buyers are fully aware, then the sellers will have to cut prices and will not make a lot of profit. When markets work efficiently, everyone benefits.