a) p.44 "Two kinds of market frictions arise from the uneven supply of information. There are search costs: the time, effort, and money spent learning what is available where for how much. And there are evaluation costs, arising from the difficulties buyers have in assessing quality. A successful market has mechanisms that hold down the costs of transacting that come from the dispersion of information."
-I really liked this passage, especially retrospectively because it gave a good summary of the main point of the readings. It takes a very general explanation of why the bazaars don't act to benefit the consumer without actually mentioning the bazaar.
b) Transaction costs refer the extra costs that can't be seen in the purchase price. Things like search costs and traveling costs that can't be directly seen in the actual purchase price.
-You hear about a store 50 miles from home that's selling a t.v. for $150. Your local store that's one mile away sells the same t.v. for $175. You decide to take two hours off of work from your job where you make $15 an hour to get the distant t.v.. It costs you $10 in gasoline. So you have $40 in transaction costs to save $25, but those $40 are not seen in the cost of the t.v. because they are transaction costs.
c) Imperfect information will lead to prices that are different from from the equilibrium price. Uninformed sellers might not realize that customers are willing to pay $10 for something they sell at $5. It could also benefit them by allowing customers to buy their item for $5 while others sell it for $1. It could hurt customers in the same way, lack of information raises transaction costs for customers and it could cause them to overpay for goods because they don't know where the lowest prices are.
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