Saturday, September 5, 2015

Perfect Information Vs. Complete Information

Perfect information in economics is used to describe a subset of Perfect Competition.

With perfect information in a market, all consumers and producers are assumed to have perfect knowledge of price, utility, quality and production methods of products, when theorizing the systems of free markets, and effects of financial policies.

Perfect information is also a game situation in which an agent is theorized to have all relevant information with which to make a decision. It has implications for several fields.

Complete information is a term used in economics and game theory to describe an economic situation or game in which knowledge about other market participants or players is available to all participants. Every player knows the payoffs and strategies available to other players.

Complete and perfect information are importantly different. In a game of complete information, the structure of the game and the payoff functions of the players are commonly known but players may not see all of the moves made by other players (for instance, the initial placement of ships in Battleship); there may also be a chance element (as in most card games). Conversely, in games of perfect information, every player observes other players' moves, but may lack some information on others' payoffs, or on the structure of the game.

Games of incomplete information arise most frequently in social science rather than as games in the narrow sense. For instance, Harsanyi was motivated by consideration of arms control negotiations, where the players may be uncertain both of the capabilities of their opponents and of their desires and beliefs. Games of incomplete information can be converted into games of complete but imperfect information under the "common prior assumption." This assumption is commonly made for pragmatic reasons, but its justification remains controversial.

Complete Vs. Incomplete Information
In a game of complete information all players' are perfectly informed of all other players payoffs for all possible action profiles. Examples will be the Game of chicken, Prisoner's dilemma, chess, checkers etc. In all the above the players know about each others' utility function/payoffs. If instead a player is uncertain of the payoffs to other players the game is one of incomplete information. In an incomplete information setting players may not possess full information about their opponents. In particular players may possess private information that the others should take into account when forming expectations about how a player would behave. Examples would be situations such as buying auto insurance, playing blind poker etc.

Questions:

1. What should a buyer know about the seller in order to make  decisions?

2. What should the seller know about the seller to make seller 
related decisions?

3. In India, what are the ways by which buyer and seller deceive

4. What are the steps taken by Government to increase use of information / knowledge and awareness?   

Just thinking on the above given points may take you to several issues related to modern markets. Do share your observations / opinions on this important issue. 


7 comments:

Anukrati Mishra said...

1. Buyers should know since how long have the seller been operating a particular business,so as to confirm its Goodwill in the market.

2.sellers must keep an eye on each others' policy decisions like advertising, credits,etc. So they can formulate or modify their policies accordingly. Sellers should keep an account of the customers other sellers are targeting.sellers should also note each otners' work ethics too.

3.sellers deceive buyers by selling adulterated stuffs,by selling low quality products under the disguise of brands,by falsely advertising about a product.

4.Consumers are protected by Consumer welfare fund,which provides financial assistance to
Consumers and creates consumer awareness.
ISI(Indian standards Institution )also,provides a quality assurance to a consumer that a product confirms to a national standard.

#15bal105#

Arun B. Prasad said...

Dear Anukrati,

Very relevant points you have made.
What is your opinion on the issue of Perfect and Complete Information?
Perfect Information = Relevant Information / Immediate to the Product, Service etc.
Complete Information = Total information about the tactics

Think over this issue, you will get new insights into the very nature of laws regarding the Information / Knowledge economy.

Warm Regards,
Arun

ayushi gupta said...

1.the buyer should know the past history of seller in the market whether the seller is involved in fraudulent or illegal activities and also the quality of product that sellers sell whether the thing purchased is durable and high priced and most importantly the behavior of seller to thier customers if the sellers are amicable enough to purchase a thing from him

Anonymous said...

Buyer should have a complete information about the products as well as about the seller before making a purchase. Buyer should know that seller should not provide adulterated food(adding some substance to increase the quantity of food item which as a result reduces the quality and makes food adulterated), buyer should know that seller charges the market price and not more,seller should not provide inferior goods.
Seller can deceive buyer by providing inferior goods, adulterated food items, charging high prices,false advertising.
There are various step taken by government to increase use of information or awareness and knowledge i.e. through various policy, there are various schemes which protect the buyer, consumer are protected by consumer welfare fund which helps them from being cheated by the seller.

Agrawal Nishi said...

1.in order to know seller buyers should have the knowledge like for how much time the seller is there in the market, is he reliable?etc
2.a seller should know what items he used to sell, what is his value (image) in the market.
3.in India seller is deceive like in a market some seller is offering the same thing in a bit lower price.like buyer sometimes didn't give the full information
Buyer is device by seller in same ways by misrepresentation frauds
4.for awareness gov strted consumers awareness funds isi..mark and many more like this.

Misra Himanshu said...

1. What should a buyer know about the seller in order to make decisions?
A. the buyer should know about the background of the seller since when is he actually been operating in the market what are is product quality standards and are those products been scrutinized by some competent authority or by the general public as a whole a recent example can be the amount of lead found in nestle maggi which some what shocked the buyer community as as a whole and gave a heavy blow on consumer confidence over the prand because there was a general consensus among the consumer community for the reputed brand which has been operating since a long time in the market.

2. What should the seller know about the seller to make seller
related decisions?
A.the seller should have if not complete then at least a clear idea of the competition sellers method of operating and manufacturing the product also have an idea about mode of business followed so that a healthy competition can prevail in the market

3. In India, what are the ways by which buyer and seller deceive?
A. In India due to the lack of the competent authority the sellers are able to deceive the buyers the prime example can be the nestle brand cited above

4. What are the steps taken by Government to increase use of information / knowledge and awareness?
A. consumer protection act several other campaigns run by the government to increase the knowledge of the consumer "JAGO GRAHAK JAGO"

Arun B. Prasad said...

Dear Himanshu, Nishi, Soumya, Ayushi,

All the answers are well thought out and explore different dimensions.

Consumer education is important but more important is the level of awareness and the ability to exercise rights.

Ayushi has made important point on knowing the background of the seller. What are the avenues by which we can know this information? SEBI mandates seller information, RTI in case of Govt. entities, all measures of Corporate Governance and code of ethics asks the company to disclose information.

Soumya has pressed upon the need for Government to swing into action in creating relevant information. NGOs have further contributed in this area.

Nishi has used the concept of standardization to ensure that deception in quality is avoided. The question here is, by giving ISI AGMARK, BIS and other Hallmarks, has the Govt, been able to help consumers?

Himanshu has picked up all contemporary issues ,like Nestle, lack of competent authority and consumer awareness.

How far the Consumer Protection Act has resulted in helping the rural customers is the real issue? In our class, how many students are aware of the Consumer Rights? The answer will lead us to finding the legal and actual gaps in the system.

Happy to see you apply your minds on this issue..

Warm Regards,
Arun