Asymmetric information. Asymmetric information in the economy. The importance of reputation and standardization

Information asymmetry and its influence on the markets

Infidelity and asymmetry of information

Infidency information - This is the lack of comprehensive information, especially in cases where the actions of one side cannot be monitored by other parties. One of the varieties of incompleteness of information is its asymmetry.

Asymmetry of information - This is an uneven distribution of information about the product between the parties to the transaction. Usually the seller knows about the product more than the buyer, although there is also a reverse situation.

Our economic life proceeds under the conditions of asymmetric distribution of information. This means that someone from the participants of the transaction has more information, and someone is smaller. Those who have more information are trying to benefit, information gives them advantages in the transaction process. For example, selling houses with hidden defects (partially destroyed foundation, regularly flooded in spring or in the period of heavy rains, a basement), which the seller knows, but does not recognize the buyer, allows the seller to benefit in the form of a greater amount of money from sale than that The case when the buyer has the same information about the house and its defects as the seller.

Asymmetric information explains many institutional rules in society, for example: firms are established for first employees for the first time, contracts are concluded; Firms for installation of windows and doors offer a guarantee for their work.

2 Imperfection of information regarding the quality of goods: model J. Aerlof

Asymmetric information is two species, each of which entails a certain economic problem. One of these species is characterized by the presence of hidden characteristics, both from the seller and from the buyer. In 1970, J. Aerlof offered a well-known model at present, called the Limon Market.

As part of this model, the market of supported cars is considered, which is represented by good quality cars, as well as quality, which can be described as "below average." Sellers of good cars are ready to sell them at a certain price, but this price is higher than the price of bad cars. Sellers of bad cars want to sell their cars at a price that is lower than good cars want, but they know about the quality of the goods only they do not know buyers - asymmetry of information on the face. The market establishes some average price that does not suit the owners of good cars, and they leave the market. There are alone "lemons" (American jargon), for owners of which the established price exceeds the expected. And these cars will be bought, although their quality does not correspond to the price of even sellers, what they, of course, are silent, and the buyer acquires a bad car at an overpriced price, because it does not have information about his quality.

At the same time, the owner of the car, who used it for some time, is able to better figure out what kind of car he got, i.e. He assigns a new probability that his car is "lemon." This new estimate is more accurate than the initial one. Thus, an asymmetry of available information arises, since the sellers (i.e. owners) now know about the quality of cars more than buyers. At the same time, both good, and bad cars will still be sold at one price, because the buyer can not distinguish a good car from bad.

3 problems of "negative selection" and "moral risk" on commodity, financial markets and services

To begin, it should be understood in the essence of such concepts as negative selection and moral risk.

Negative selection - This is the situation in which the non-informed market of the market is dealing with absolutely not with those people with whom she would like to make a deal (that is, it conducts an unfavorable selection of informed parties). This phenomenon is not an informed side does not want to deal with anyone from those who want to deal with her - arises in many markets with hidden qualities. The problem of negative selection is closely related to the risk of unscrupulous behavior. Imagine that the manufacturer cannot choose the quality of its products - its product has or high, or low quality. If the buyer cannot distinguish high quality goods from low quality goods, high quality goods seller.

Another characteristic of situations with hidden actions, which arose due to the fact that the informed side can take the "wrong" actions moral risk. Other market participants are earned at different respects of people to risk: fraudsters - on risk leaning, insurers - at no way to risk.

We will give the most common problems of "negative selection" and "moral risk" on commodity, financial markets and services markets:

Buyers at the time of purchase (and sometimes later) are not able to appreciate the quality of goods or services purchased to them;
- Insurance companies are not able to estimate the likelihood of an insured event by the person (or firms), which turned to insurance;

Banks are not able to estimate the probability of non-repayment of loans by borrowers;

Moderator cannot appreciate the "quality" of employed employees;
- the regulatory body does not have sufficient information on the level of costs of regulated firms;

The patent owner does not fully appreciate the winnings of possible customers of the patent from its use.

4 asymmetry of price information. "Trap" for tourists

The incomplete awareness of the buyer about the pricing of goods, as well as his uninformism of quality, allows firms on the market with a low concentration of sellers to receive economic profits. The price competition between firms on the market is limited the stronger than the worse buyers are aware of the price level for substitute goods from different sellers. The disadvantage of at least part of buyers about the level of prices of similar goods from different sellers makes it possible to raise the price.

Consider the features of the market equilibrium in the case when the seller is opposed by buyers, of which at least part of the relative prices of similar goods do not know. We analyze such a market on the example of the sale of souvenirs in the city, where tourists and local natives acquire them.

Suppose the tourist comes to the city N for a very short time. He would like to buy some souvenir for memory. Since the tourist does not have time to bypass all souvenir kiosks and price comparison, and in this city he is unlikely to return, the tourist comes to the first kiosk and buys souvenir. What will be the price of a souvenir if there are many tourists in the city?

We will assume that:

All firms sell the same goods (perfect substitutes);

Costs per unit of goods for sellers are the same;

The functions of the usefulness of tourists are the same;

Guides provide tourists about price distribution (as in the city of cheap and expensive shops), but not about the level of prices in each particular store;

The costs associated with the search and the acquisition of goods (as applied - for example, taxi costs - and implicit, including the alternative value of the spent time), are equal to one store.

Let us analyze the price strategy of sellers in the short term. Suppose that the number of firms on the market is high enough, so the market share of each seller is negligible. Is it possible in this market an equilibrium of a completely competitive market? Yes, perhaps. But will it be equilibrium? Consider the maximizing profit of the price strategy of one of the sellers - we denote by A. Let all firms, except the company under consideration, are prescribed a price for the goods equal to the limit costs of PC \u003d MS. Suppose that the firm A prescribes the price of R A \u003d PC + ε, where ε is a small positive value. Tourist buyers fall to different sellers randomly, and a small price increase does not reduce the number of potential customers. A tourist knows that in another store it will be able to buy goods at a lower price, but it will be associated with additional search costs. The buyer's choice will depend on the ratio of the cost of finding and a potential winning from the purchase of goods at a lower price. If ε.< С, покупатель предпочтет купить товар.

Consequently, the firm A can raise the price of ε< С и получить ненулевую экономическую прибыль в результате превышения цены над предельными и средними издержками. Но точно так же могут поступить и остальные продавцы. Ни у одной фирмы нет стимула придерживаться цены, равной предельным издержкам. Следовательно, несмотря на большое число продавцов на рынке, параметры рыночного равновесия будут отличаться от равновесия конкурентного рынка.

If all sellers set prices higher than the limit costs, the firm and again can raise the price to the PC + 2ε. At the same time, the residual demand for the product of the company will not decrease. But exactly the same considerations will be guided in their policies and other firms. Consequently, the price of the market will be even higher. The rates of increasing the price will be the monopoly price of the RM, in which the seller's limit revenue is equal to its limit costs. Thus, a "trap for tourists" is created on the market, forced to pay the difference between the price and the limiting costs due to their non-informity.

Opportunist behavior of firms - price reduction compared to the monopoly price - will be carried out only when the price difference is sufficiently high compared to the search costs in order to expand the residual demand for goods to firms that reduce the price. The more sellers in the market, with other things being equal conditions are less likely to search by the buyer of the company establishing lower prices. The economic profit of sellers at the expense of prices exceeding the limit costs will cause the entry of new firms to the market. The residual demand of each firm will decline until the average costs reach the level of the price, and the economic profit is zero. An equilibrium characteristic of monopolistic competition will arise on the market, but in contrast to monopolistic competition, excessive power will serve as a fee for a variety of goods, but for non-informity of buyers.

So far, we assumed that none of the buyers knows the prices of specific sellers. But the markets are much more typical of the situation when there are different groups of buyers, in varying degrees informed about the prices of goods at different outlets. Different level of awareness can be explained by differences in preferences, differences in the alternative value of time, different frequency of purchases and many other reasons.

Suppose that buyers are divided into two groups: non-informed and informed about the prices of various sellers ("local natives" as opposed to "tourists"). Let L consumers, Al consumers of the 1st type and (1 - a) l consumers of the 2nd-type consumers operate on the market. Each consumer buys exactly one unit of goods. The residual demand for the goods of each company depends not only on the number of sellers, but also from the share of informed buyers in the market (Fig. 5.2).

At prices above q, the volume of residual demand is zero. For a price equal to q, the amount of demand is equal to the ratio of the number of non-informed price of buyers to the number of firms in the market: QD (p \u003d θ) \u003d (1 - a) Q / n, where q is the total number of buyers; n - the number of firms in the market.

For the price equal to the limit costs (the price of the market of perfect competition), the amount of demand is equal to the number of informed buyers per company: QD (p \u003d ms) \u003d a q / n. With a price below the price of the market of perfect competition, the volume of residual demand is equal to the number of buyers informed about the prices of buyers and the share of non-informed prices of buyers per seller. If the number of buyers informed about the prices per company is quite large, the price is preferred for the limit costs: it allows for at least to receive normal profits. The number of informed buyers plays a role for the seller, a similar role of the price elasticity of residual demand: the more in the market of informed consumers, the less the opportunity to assign a price exceeding the limit costs and receive economic profits.

If the company accounts for relatively little informed consumers, the seller can receive economic profits by appointing a price equal to maximum readiness to pay for goods of uninformed buyers (Fig. 5.3).

With a small number of informed consumers, an equilibrium with two prices arises in the market: part of the stores sells goods at a price θ, part - at a price equal to the minimum of medium costs.

So, the choice of a high (equal θ) company or low (equal limiting costs) depends on the number of customers informed about the price per company. But this number, in turn, depends on the pricing policy, which is carried out by the remaining firms of this market.

Suppose all firms except the company A prescribe a price equal to θ. In this case, lower prices will lead to a significant expansion of residual demand due to the fact that all informed buyers will purchase the goods from the company A. Consequently, lowering prices compared to the competitor's price, but not lower than the minimum level of average costs, the maximizing profits of the strategy for Firms A.

On the contrary, if all firms, except for the company A, prescribe a price equal to a minimum of medium costs, a company and will be able to receive economic profits by raising the price to θ and reducing sales. Thus, the maximizing profit of the price strategy for the company and depends:

From the ratio of the number of informed and non-informed buyers;

From policies selected by other firms.

One of the main prerequisites in traditional microeconomic analysis is the assumption that all participants in market operations have complete information about all goods, services, resources in markets.

In fact, the information is unevenly distributed among

market participants. As a rule, sellers know about the properties of goods much more than buyers.

Asymmetric information is an arising in the process of concluding contracts, a situation in which individual participants have an important relevant attitude to the subject of the contract, the transaction with information that other participants do not possess.

Situations of asymmetric market information are found in real life everywhere. Suppose there is a specific product. Buyers from personal experience know that this product can be good or bad. However, only in appearance it is impossible to determine the quality of the goods. Buyers agree to pay 30 de for a good product and 15 de - for bad. In turn, sellers are ready to sell a good product for 24 de, and bad - for 12 de. If the quality of goods could be installed, then two markets arose: there would be a good product on the first, at a price of 24 to 30 de, on the second - bad goods at a price of 12 to 15 de. But the goods externally indistinguishable. Therefore, in such a situation, the price of demand is installed in the range from 15 to 30 de. At the same time, if the price falls below 24 de, then a good product will simply disappear from the market.

The asymmetric distribution of information leads to full or partial displacement from the "good" goods "bad". This phenomenon was called negative selection or adverse selection.

An unfavorable selection entails internals, which reduces the utmost utility of goods for the buyer.

Internals - costs or benefits received by the participants of the transaction, which were not stipulated during its conclusion; There are as a result of the conclusion of the transaction in conditions of insufficient (asymmetric) information, inaccessibility of information for one of the parties.

The asymmetry of information reduces the efficiency of the market as a whole. But, first of all, it is not beneficial to sellers of good goods. They are interested in the buyer to select their product from the total mass of goods. To overcome asymmetric

information Sellers Good Products offer warranty, claiming a higher price. An important factor is the reputation of the company. The state can help solve this problem, accumulating and providing market information, for example, creating information centers, as well as establishing and protecting the right to receive full and truthful information about the product.

Despite the long history of studying the problems of market operations and the achieved successes, many problems associated with the emergence of distortions generated by asymmetry and incomplete information are still not solved.

A source: Siberian Financial School, 2007, №2.

In the main fundamental microeconomic studies, the behavior of the market agents is analyzed on the basis of the assumption that they have full information necessary for making solutions. An example of complete and symmetrical information is the market of perfect competition, where market prices defined through the interaction and supply provide market agents comprehensive information about the existing alternatives, which makes it possible to make optimal solutions. In fact, the conditions in which economic decisions are made are extremely rarely comply with the assumption of the completeness and symmetry of the distribution of information. On the contrary, the general rule is the lack and inaccessibility of market information, which prevents the adoption of optimal solutions.

Another problem is an uneven distribution of available information among market participants, with the result that serious deformations are possible in the behavior of sellers and buyers. In this regard, it is necessary to analyze the impact of incompleteness and asymmetry of information on making decisions and the functioning of the market.

Market imperfections. Asymmetry of information

The importance of information for making decisions does not need any special justification. Such evidence is that the assumption of the completeness of the information was taken as a mandatory in the analysis of all major microeconomic market models.

Meanwhile, informational support is a very difficult problem. First, for the most part it is difficult access to information. At least, receiving almost any information is related to costs. So the desire to obtain it involves the compassion of the costs associated with obtaining information and additional benefits from its receipt.

The reliability of information, given its variability and obsolescence, is another significant problem.

In addition, even the incoming information cannot be fully learned, and some part of it will be inevitably cut off.

Finally, there are cognitive restrictions in the perception of information, in its proper understanding and evaluation, which is associated with the peculiarities of human thinking.

All noted gives enough reason to output about the incompleteness of information as objectively existing data.

Informous information is one of the direct causes of market uncertainty.

Market uncertainty There is a condition for making economic decisions. The meaningful side of the market uncertainty is that economic entities are forced to make decisions under conditions, the change in which is difficult to predict, and the probability cannot be assessed. Since the informality of information always exists, then market uncertainty in principle is dismissed. It can be reduced, but not exclude.

The presence of market uncertainty has several consequences. First, it prevents the adoption of optimal solutions. Secondly, it generates additional transaction costs. Thirdly, due to market uncertainty, economic entities are in unequal conditions when making decisions. Fourthly, it affects the nature of the behavior of firms: the higher the market uncertainty, the greater the inclination of firms to cooperative strategies of behavior.

Firms can only be observed prices, and the market demand and production of products are unknown by competitors. The decline in price can be perceived by the firm as a consequence of an increase in production of products towards competitors, although in fact it was caused by a reduction in demand. The adoption of optimal solutions in the conditions of uncertainty is engaged in young actively developing science - risk management.

Generating the market uncertainty of informality is only part of the problem with which participants in market operations are faced. Another part of this problem is that available information is unevenly distributed among market transactions. The seller is more aware of the product than the buyer. But the buyer knows what maximum price he is willing to pay for the benefit, and this is unknown to the seller. The seller knows at what minimum price it is ready to sell the product, and this is unknown to the buyer. Different degree of awareness of the market agents is called asymmetry of information.

Thus, the asymmetry of the information is the uneven distribution between the participants of the information market information on the conditions of the market transaction and the intentions of each other.

Asymmetry of information is an internally inherent market. The question is only as an asymmetry of information, since it will depend on this impact on the functioning of the market as a whole. The impact of the asymmetry of information on the market is multifaceted. It modifies consumer behavior and strategy firms affects competition and on the efficiency of the market functioning.

There are two types of asymmetry of information: hidden characteristics (one of the sides of the market transaction has more complete information than other) and hidden actions (a more fully information participant in a market transaction may take action not observed by a less informed participant).

Two more circumstances should be taken into account.

The first of them is that hidden characteristics are a consequence of the properties of the object of the market transaction itself, that is, the goods. The quality of some benefits can be detected before consumption, that is, at the time of purchase (for example, a pencil, jacket or shoes). The quality of others is detected only in the process of consumption, that is, after purchase. These are products that may have hidden defects detectable only during operation (for example, household appliances). But there are also the benefits of the third type, the quality of which cannot be revealed even in the process of consumption. This, for example, drugs and cosmetics - the degree of conformity of their actual properties of the claimed seller is very difficult to establish. It is quite obvious that the last two types of goods themselves generate asymmetry of information. The same can be said about the participants of the market transaction, within which the intentions of the opposing party are always hidden characteristics.

The second circumstance is that the presence of information asymmetry creates an opportunity to abuse it, that is, for unfair behavior. If the seller knows that the quality of the product cannot be determined even in the process of its consumption, then why not sell a less quality product at an overestimated price that meets the buyer's expectations? Moreover, for the seller such behavior will be quite rational. The insured may take actions (intentional and unintentional), which, remaining unobservable for the insurer, can affect the offensive of the insured event.

Forms of manifestation of the impact of asymmetry of information on the market are diverse. In some cases, asymmetry of information may cause market law of sellers. Because the receipt of information is related to the buyer with additional costs, it has the meaning only if the expected benefits exceed the cost of finding information. When buyers are not aware of the value of the costs associated with the search for information, and the magnitude of the benefits of obtaining it, this can use the seller, establishing the price of the product above the equilibrium. In other words, even on the market of perfect competition there are situations where the seller can sell goods at prices exceeding the limit costs of production.

Everyone knows: the highest prices in places that are often visited by tourists. Of course, the reason for this is not only asymmetry of information. But she also plays a latter role: sometimes it is enough to go as an angle to buy the same product at a significantly lower price. But a person who does not speak reliable information about the level of prices will not do that, since it does not know what benefit it will receive. A local resident, knowing the order of prices, will decide on the purchase based on the compassion of additional costs (time for walking per corner) and benefits (price difference). This is partly explaining why the same goods are sold at different prices. Consequently, the asymmetry of information is a factor that reduces the effectiveness of price competition.

Information asymmetry is also a source of price discrimination. Often the buyer is not able to determine the qualitative characteristics of the good. This gives the seller to differentiate the product on the basis of not a real change in its parameters, but through their imitation, which is called phantom differentiation. The same cognac can be sold in different bottles at different prices under the names "Southern" and "Royal". This is a typical example of price discrimination based on asymmetry of information.

Not only the consumer suffers from the asymmetry of information. The hidden characteristics of buyers often become a reason for inconsistent profits even for firms with significant market power. For example, a monopolist air carrier can get the maximum profit if the price is established in accordance with the preferences of consumers. Readiness to pay for entrepreneurs higher than tourists. The problem is however in the fact that the category to which each specific passenger belongs is for the carrier with a hidden characteristic, which is the cause of inefficiency. The establishment of the price of the ticket on the "Business" level will give high income from one ticket, but will reduce the cumulative revenue due to the reduction of the aircraft loading. The price of the ticket price on the "tourist" level will provide full loading of the aircraft, but will reduce income from one ticket.

Hidden characteristics represent a serious problem for employers when hiring labor. If the employer is not able to determine the professional qualities of workers, it may cause not only reduction in its profits, but also to reduce the efficiency of the labor market.

So, the asymmetry of information has a significant impact on both the behavior of market participants and the mechanism of its functioning. Depending on the degree of asymmetry of information, the negative consequences determined by it can manifest itself both in the non-optimal distribution of resources and in the impossibility of establishing market equilibrium.

Joseph Stiglitz noted: "The study for which George Akerlof, Mike Spence and I were awarded in 2001 by the Nobel Prize, - part of a large research program that today covers thousands of researchers around the world. We hoped to show that fundamental changes are coming in the information economy. Problems of information are central not only in a market economy, but also in political economy, and we explore some of the meaning of information deficiencies for political processes. "

Problems of the existence of markets in the conditions of asymmetry of information

In some cases, the asymmetry of information can have such a strong impact on the operation of the market that the market acquires the specific characteristics of the "Limon Market".

Such a definition was introduced into the scientific circulation by the US economist J. Akerlof, which was the first to describe the influence of the asymmetry of information on the market, and stems from the definition of goods adopted in North America with hidden defects as "lemon". In general, the "Limon market" can be characterized as the market with a high degree of asymmetry of information. The essence of the problems of the "Limon Market" comes down to the fact that, firstly, the presence of hidden characteristics creates incentives for unscrupulous behavior (risk of irresponsibility) and, secondly, hidden actions launch the mechanism of market destruction (negative selection).

Risk of irresponsibility

When information between market participants is unevenly distributed, then persons with more complete information about the good or about the conditions of the transaction are in winning and can use this circumstance to their own gain. Such a phenomenon received the name of the risk of irresponsibility.

The risk of irresponsibility (MORAL HAZARD) is unfair behavior that consists in the distortion of information and is characterized by the desire to extract additional benefits due to the availability of asymmetry of information.

Although we define the risk of irresponsibility as unfair behavior, it is, strictly speaking, not quite a suitable characteristic to assess market behavior. Distortion or even failure to submit any part of the information is evidence of unfair behavior. However, it is impossible to forget that obtaining information is related to costs. Therefore, the risk to which a low-informed person is subjected to, from an economic point of view, can be considered as a peculiar fee for access to information. In other words, in an economic aspect, obtaining benefits by possessing more complete information is fully responsible for the principle of rational behavior. Consequently, the analysis of the impetence of irresponsibility to the market will be carried out by the imperatives of morality.

The essence of irresponsibility risk problems is that the market with asymmetric information provides the possibility of one of the participants in the market transaction to abuse the expectations of another participant who has less complete information. We will illustrate this on the example of a market transaction with a blessing (Fig. 1).

Fig. 1. Consequences of manifestation of irresponsibility risks with a one-time transaction

Suppose that two firms produce a similar product, the quality of which cannot be determined by the buyer when selling, for example, car radio tape recorders. In the case of information asymmetry, demand will be the same in relation to both high-quality and poor-quality goods. At the same time, it is quite obvious that, with other things being equal in a company producing a better product, the average production costs (ASK) will be higher than the average costs (ASN) of the company, which produces a lower product product (ASK\u003e ASN). If both firms maximize profits, then the producer of low-quality goods is optimal (Mr \u003d MSN) will be released at the price of pH, and for the manufacturer of high-quality goods (MR \u003d MSK) - release QC at the price of the Republic of Kazakhstan. If the buyer's expectations are related to the fact that all goods are homogeneous (do not differ in qualitative parameters), then it will naturally buy the goods whose price is lower. Since the price of a low-quality product is lower, it plays the role of equilibrium - all buyers will focus on her. The manufacturer of high-quality goods is either will not be able to sell anything, or will be forced to sell at the price of a low-quality product (pH).

Will he be in this case to make a profit or income losses, depends on the ratio of the level of average costs of the company and the price level established by the manufacturer of the low-quality goods. However, in any case, the magnitude of the seller's low-quality goods arrived more than the seller's profit of high-quality goods. Since ACN (P * 'Qc - ACK - QC). Since the sellers of high-quality goods will receive low profits or incur losses, they will be forced to either leave the market, or, most likely to reduce product quality. Such a situation is inevitable for any type of buyer's expectations. When its expectations are associated with the fact that low-quality goods are dominated on the market, it will still be guided by the same decision to make a decision - to buy cheaper goods. Consequently, the result for the market will be the same.

The effects of irresponsibility risk are not unambiguous. If the buyer is not able to identify the actual quality of goods when buying, it can do it in the process of its consumption. If the quality of the goods is determined in the process of its consumption, this allows the buyer to identify sellers, and the more clearly, the greater the repetition of the purchases. With a recurring interaction between the seller and the buyer, the degree of asymmetry of information for the buyer will decrease and it will be able to differentiate merchant goods. This, of course, does not mean that consumers will refuse low-quality goods, but only says that the demand for high-quality goods (DC) will be addressed from demand for low-quality goods (DN) (Fig. 2).

Fig. 2. Elimination of asymmetry of information with a repeated interaction of the seller and buyer

In this case, the market situation changes radically. In fact, we get the market for monopolistic competition, where the sellers of the differentiated product compete for sales. Accordingly, the distribution of market share of vendors and their profits will depend on the characteristics of the demand for each of the goods and the level of production costs. In our case, the seller of high-quality goods sells it at the price of the Republic of Kazakhstan in the amount of Qc, and the seller of low-quality goods - by price pH in the amount of QN.

The general conclusion that allows you to make an analysis is that the degree of manifestation of irresponsibility risk depends on two factors:

- customer awareness;

- Repeatability of interaction between the seller and the buyer.

It is quite obvious that the degree of buyers awareness directly depends on the repeatability of their interaction with sellers, which contributes to the growth of buyers awareness, and therefore reducing the degree of asymmetry of information. After all, it is not by chance that low-quality goods are most often sold through street vendors or in the form of so-called promotions, when the repetition of purchases is actually excluded. However, the extent of manifestations in the risk market of irresponsibility depends on the share of informed buyers. In this regard, several patterns can be formulated.

Share of knowledgeable buyers is growing:

- with an increase in the difference in the price of goods;

- reducing the readiness of buyers to pay.

The smaller the difference in the price of goods and the higher the readiness of the buyers to pay, the less the proportion of the buyers. The fact is that with a low tendency to pay and a big difference in the price of the buyer there are incentives to search for additional information, that is, to carry out costs to reduce the asymmetry of information.

Negative selection

The most vivid example of the ineffectiveness of the market mechanism in terms of asymmetry of information is negative selection. The problem of negative selection is closely related to the risk of irresponsibility and is essentially its special case. The specificity here is that in the case of a negative selection of the buyer's expectation, it is strictly defined, simply mentioned: based on the high probability of presence in the low-quality good market, it is ready to pay only at a low price. Given that the costs of the sellers of the high-quality benefit above the costs of sellers of the low-quality good (ASK\u003e ASN), with an equilibrium price P * the first will be lost damages (ASK\u003e P *), the second will receive profits (ASN

Negative selection (Adverse Selection) is a way to functioning a market, which is characterized by the process of substitution of high-quality goods by low-quality, generated by the presence of asymmetry of information.

I will illustrate the classic example with the market for used cars borrowed from J. Aerlof. But first consider the situation where the asymmetry is missing.

An example of such a situation can serve a separate functioning of new markets, that is, not used, and used cars.

As can be seen from fig. 3, each of the markets is formed its special equilibrium (point A for the new car market and the point B for the used car market), depending on the characteristics of market demand and suggestions characteristic of them.

Now consider the situation that arises in the used car market, where the degree of asymmetry of the information is especially large. The specifics of this market is that the buyer can estimate the external condition of the car, but not hidden defects. Based on the conviction that good things in this market are not sold, the buyer will consider any used (even a nearly new) car as a low-quality benefit. On this basis there is a dissonance between the price of the seller and the price of the buyer. Sellers know the quality of cars that sell. The seller of a high-quality car will require a high price for him, and the seller of low-quality is ready to sell the car at a low price. If we assume that the buyer comes from an equal likelihood of buying a high-quality and low-quality car, he will agree to the average price - below the price of high-quality cars and higher prices of low-quality.

In such a situation, high-quality car sellers abstain from the sale. Sellers of low-quality cars, on the contrary, will receive the price higher than expected, which stimulates the expansion of the supply of low-quality cars. In this case, the process of replacement of high-quality products will be progressing. Magnifying in low quality cars, buyers will begin to reduce the price, and sellers offer all less high-quality cars. As a result, the market may be in position when the prices of the buyer and the seller will be incomparable and market transactions will be impossible, that is, the market will collapse. Such is the verbal model of the negative selection mechanism under conditions of information asymmetry.

The graphic model of the negative selection mechanism allows you to deeper into the content of what is happening.

Fig. 4. The mechanism of action of negative selection and its consequences

Suppose the demand for high-quality used cars is asked as DK, and their offer is SK. The demand for low-quality cars is set as DN, and their offer is SN. Presented in Fig. 4 The location of the curves of supply and suggestions for each type of good is not by chance. Since the buyer's readiness to pay for a quality car above, then the demand curve for such cars is located above. Sellers of low-quality cars are ready to agree to lower prices, which is why the curve of supply of vehicles of this type will be located below the curve of supply of high-quality machines.

If the asymmetry of information does not allow buyers to identify cars in quality, and their expectations are associated with the fact that among the used cars presented in the market - high-quality, and half - no, then the demand curve will move to Daxyim, in the middle between demand curves for high-quality and low-quality curves Cars. As for the proposal, there is no such thing about it, because the sellers are accurately aware of the quality of sold cars. As a result, with this demand and in accordance with the proposal of each type of machines on the market there are two equilibrium points: C is a point of equilibrium for high-quality cars and D - for low-quality.

The formation of two equilibrium points in the same market is associated with differences in subjective estimates by buyers of communication "Price - Quality" and does not matter for the essence of what is happening. The essence consists in comparing outcomes in the presence of asymmetry of information and its absence. If the asymmetry of the information was not and buyers could accurately identify cars in quality, then the equilibrium would be achieved at the points A and V. With the equally accurate distribution of automanias in quality (half of the quality, and half of the low-quality) volume of purchases of one type of cars would be the volume of purchases of another type (In our case - 100 units). However, as can be seen from fig. 4, with the same amount of total sales (200 units) due to the availability of asymmetry of information, there was a shift in the volume of purchases towards the low-quality good (160 units) by reducing the volume of purchases of high-quality cars (40 units), which indicates displacement with The market of high-quality good is low-quality. There is a negative selection consisting in the fact that the market is transformed into the market of poor-quality goods.

The market will collapse or not, depends on the level of additional costs that occur under the influence of information asymmetry, as well as on the ability of its participants to control the level of this asymmetry. For example, when voluntary insurance of autocarted liability, the price of insurance will be determined by the risk of losses (damage) and the likelihood of the occurrence of the insured event. If insurers cannot identify drivers according to the degree of risk and do not have tools of influence on them, they will have to establish a high price of insurance. Neat drivers will find such a price for themselves inadmissible and refuse insurance. Therefore, the share of drivers who often fall into the accident will increase among the insurers. As the price of insurance increases, the proportion of such drivers will increase, and therefore the costs of insurers will grow. Finally, only those insurers will be in the system, which will surely make an accident. In such a situation, the risk distribution between participants underlying insurance is not possible, and insurers will be forced to stop their activities. The only way out is to assign the price of insurance, equal to the amount of damage plus the costs of the insurer. But this price will become unacceptable for insurers.

The problem "Principal - Agent"

A special sphere of manifestations of irresponsibility is a contractual relationship between the parties, one of which entrusts the other for the remuneration of any action. The party, which gives the order, received the name of the principal (Customer) in the economy, and performing the assignment - agent (performer). And the principal and agent can be a separate person, and a firm, and organization, and the public institution.

The characteristic features of the relationship between the principal and the agent can be illustrated by a simple example. Suppose a citizen decided to buy an apartment. Poorly focusing in the housing market, without being able to pay a lot of time to search, very superficially knowing legal norms in this area, etc., he decides to address the services of the real estate agent (as an agent can play a firm for real estate operations) . The agent has the necessary professional knowledge, presents itself to the situation of the housing market, has a specific information about the offered apartments, the word, there is reason to believe that it will cope with the task better.

A citizen is interested in acquiring a fairly spacious and comfortable apartment and, if possible, cheaper. If he had independently compared the various purchase options, then the usefulness of the apartment would commend.

In the sense of the contract, the agent must act in the interests of the customer. But in reality, his interests lie in a different plane.

We assume that the agent will receive remuneration only if the transaction takes place, and in the amount depending on the amount of the transaction (for example, in the form of a fixed percentage). The usefulness of the apartment for the principal does not interest him. He is interested in the apartment to be purchased at a higher price. In addition, he does not want to spend extra efforts to search. Since the principal does not have information as far as the agent, and cannot monitor the quality of its choice, then, most likely, the proposed apartment will be for the principal acceptable, but not necessarily the best.

Of course, if there is a competition in the market of agency services, a citizen can refer to another agent and compare the quality of services. If this market was perfect, then the agents would be interested in optimal for their clients (principals) choices. However, significant transaction costs and other factors of the imperfection of the agency services market cause more or less significant losses from customers.

This simple example shows the conditions for the occurrence of irresponsibility risk associated with the problem of "Principal - Agent":

- incomprehension of the interests of the principal and agent;

- information asymmetry (in favor of the Agent) in terms of the quality of the fulfillment of the terms of the contract;

- Imperfection of the market of agency services.

The problem of the relationship between the principal and the agent took an important place in the modern theories of the company and the economy of the public sector.

The idea that the behavior of the firm is completely subordinated to the interests of its owners, a strong simplification. Labor - the resource is special in that, that it cannot be separated from the seller - an employee, and each employee is a carrier of his own interests. Control by the administration for the activities of employees requires costs and may not always be complete. The less standard work, the harder it is to control its execution.

The owners (shareholders) are actually managed by a large firm, but hired managers. If the manager is not a shareholder, then the profit maximization is not included in the circle of his personal interests. Its motifs are different: preservation and increase status, expansion of activity, etc. If the owners are equally interested in and revenue and costs are positive and negative profits, the manager is often interested in increasing revenue and indifferent to costs. However, the possibilities of shareholders regarding control over the activities of the administration are very limited.

In whatever forms, there are neither the consequences of asymmetry of information, they all indicate that the information asymmetry has a serious negative impact, expressed in reducing the effectiveness of the market and the market and the economy in general participants in the market.

Regulation of information asymmetry problems can be carried out at the level of optimization of the economic system as a whole. At the same time, market information plays the role of social benefit, and its distribution is one of the most important functions of society. Therefore, the legislative regulation of economic activity, the development and support of the state of public organizations - alliances (associations) of consumers and producers, social insurance, organization of institutions of information mediation - credit bureaus, accumulating retrospective information, is the legislative regulation of economic activities, development and support by the state of activities of public organizations.

The effects of information asymmetry along with transaction costs are "defects of the microstructure" of market interactions of economic activities that lead to non-optimal placement of resources. Information economics - intensively developing branch of microeconomics. Its problems include signaling methods to limit information asymmetry.

Overcoming the problem of asymmetry of information at the functioning of economic agents - the concern of the company. Moreover, firms have to solve the problem as from demand, where information asymmetry is manifested in the characteristics of buyers and from the proposal, where the firm must protect itself from the manifestations of negative selection. This company uses the concept of market signals developed by Michael Spence.

Notes

1. Voronov Yu.P. The first Nobel Prize in Economics // Eco. 2002. No. 1. P. 40-61.

2. Varian Hr. Microeconomics. Intermediate level. Modern approach: Textbook for universities: Per. from English: ed. N.L. Frolova. M.: Uniti, 1997. 767 p.

3. Pindaik R.S., Rubinfeld D.L. Microeconomics: Per. from English M.: Case, 2000. 808 p.

4. 50 lectures on microeconomics: in 2 tons / ed. V.M. Halperina: SPb.: Economy. School, 2000. T. 2. 776 p.

5. Samuelson P., Nordhaus V. Economy: Per. from English M: Williams, 2003. 688 p.

6. Stigler J. Economic Information Theory // Firm Theory / Ed. V.M. Halperin. St. Petersburg, 1995.

7. Twid L. Psychology of Finance: Per. from English E. Temergalieva. M.: Analytics, 2002. 376 p.

8. Finance and credit: Tutorial / Ed. M.V. Romanovsky, G.N. Bellazova. M.: Higher. Education, 2006. 575 p.

9. Fisher S., Dornbush R., Shmalenzi R. Economy: Per. from English 2nd ed. M: Case, 1997. 864 p.

10. Heyne P., Bouthern P., Launching D. Economic Image of Thinking: Per. from English M.: Williams, 2005. 544 p.

11. ABOODY D., Lev B. Information Asymmetry, R & D, and Insider Gains // The Journal of Finance. 2000. Vol. 4, No. 6 (DEC.) [Electronic resource].

12. Akerlof G. The Market for Lemons: Quality Uncertainty and The Market Mechanism // Quarterly Journal of Economics. 1970. No. 84. P. 485-500.

13. James A. mirrolees. INFORMATION AND INCENTIVES: The Economics of Carrots and Sticks: Nobel Lecture. 1996. DEC. / By Faculty of Economics and Politics, University of Cambridge, England [Electronic resource]. Access mode: http://www.nobel.se/economics/laureates/.

14. Grossman S., Stiglitz J. On The Impossibility of Informally Efficient Markets // American Economic Review. 1980. No. 70. P. 393-408.

15. Hillier B. The Economics of Asymmetric Information. Macmillan Press Ltd., USA, 1997.

16. SPENCE M. MARKET SIGNALING. Harvard University Press, 1974.

17. Stiglitz J.E. Information and the Change in the Paradigm in Economics // The American Economist. 2003. Vol. 47, № 2 [Electronic resource].

18. Stiglitz J.E. The Role of the State in Financial Markets // Proceedings of the World Bank: Conference on Development Economics, 1993. P. 19-51.

19. Stiglitz J.E., Weiss A. Credit Rationing in Markets with Imperfect Information // The American Economic Review. 1981. Vol. 71, No. 3 (June). P. 393-410.

1.2. Causes of information asymmetry

1.3. Decision "Problems of Information Asymmetry":

signals about quality

1.4. Limon Market George Akerlof

1.5. Cone paradox. Price discrimination.

1.6. conclusions

2. Task.

3. Test question.

Information asymmetry: causes, form of manifestation, consequences (Akerlofa model and Cone paradox).

What is information asymmetry

Information asymmetry (Information Asymmetry.) - This is a situation in which one of the groups of market participants owns the information necessary for their affairs, and the other group does not own.

In case of perfect competition, when market prices are automatically installed, according to the level of supply and demand. It follows that alternative costs accurately correspond to the level of prices defined by supply and demand, and, therefore, quite accurately convey information about themselves to sellers, buyers and owners of resources. This case is an example of a symmetric distribution of information that allows business entities, absolutely effectively coordinating economic activities.

But, in reality, the case of perfect competition is impossible, so sellers and buyers in the market are always faced with uneven distribution of information. One of the parties is always aware of what another side of the transaction knows.

Causes of information asymmetry

The problem of asymmetry of information is one of the most important prerequisites for the functioning of the public sector, but for this it is necessary, firstly, to identify the causes of asymmetry of information that arise in various markets, and secondly, if possible, to identify ways of impact on the relevant markets.

An important reason for the reduction in the intensity of competition and the acquisition of monopoly authorities in the markets is the incomplete and asymmetry of information about the object of transaction, on the procedure for the implementation of the transaction and its possible consequences, which may be caused by the following reasons:

Obtaining information is known to be related to resource costs, therefore, a rational economic entity will not pay for information if the limiting costs of obtaining it will exceed the income from its use;

Information is not always reliable. So, due to changes in the economic environment, the information obtained by an economic subject today and tomorrow may be outrage and, therefore, it cannot be used to make economic decisions;

Economic entities are not able to estimate the entire amount of available information. At the same time, a certain part of the total information is lost;

Not all economic entities possess sufficient knowledge and skills that allow them to evaluate the incoming information.

The informality of information is a prerequisite for economic life, which can influence the conditions and features of the operation of the markets, lead to additional transaction costs for economic entities. It is important to note that the greatest impact on market activity may have a special type of incompleteness of information - asymmetric information that creates real abuse possibilities with one of the participants in the transaction of the counterparty non-formation. The asymmetricness of information leads to a sharp decrease in public welfare.

The solution of "Problems of Information Asymmetry": signals about quality

In real life, we see not so many markets, where low-quality benefits really displacing high-quality benefits, because it hinders, firstly, the activities of the state that is aimed at supporting manufacturers and sellers of precisely high-quality goods; secondly, the active activities of the relevant independent organizations of consumers; Third, the targeted policy, which is carried out by manufacturers of high quality goods.

support for standardization and certification;

price policy.

Standards are a set of criteria that the product must match. They can be administered at the initiative of not only government regulators, but also within the framework of special initiatives of the consumer union, industrialists, etc. Certification is a definition of compliance of a product standard. It can also be carried out at the initiative of industrialists, but according to individual products by government agencies, certification may be provided in obligatory. These types of products unconditionally include food and drug markets.

At the same time, we note that the standards and certificates can also bring adverse negative results. First, they are very often used in frankly anti-competitive purposes. Secondly, standardization does not provide for the possibility of developing new products that may not fit into the framework of existing standards. Thirdly, it is also very important, standardization and certification are associated with additional costs, and therefore, they also lead to price increase, limiting access to some part of consumers to the market.

Control of advertising activity of market entities involves blocking the path of unreliable information, which contributes to the displacement of bona fide sellers unfair. In Russia, the Federal Law "On Advertising" is currently operating, which limits advertising in the market. The Federal Antimonopoly Service actively opposes unscrupulous advertisers both on the federal and regional markets, but advertising legislation is not able to provide all possible ways of unfair informing buyers. It can prevent the agitation of the low-quality product, but not its production and implementation.

Regulation of state prices is aimed at preventing the use of low-quality product benefits of costs, limiting price competition in the market. An example of price regulation in the Russian Federation is the market for alcoholic beverages. Combined with the obligatory certification of the goods, this measure allows you to increase the competitiveness of high-quality goods, since with the relative difference in the price they become more preferred for the buyer.

State regulation is incapable of fully solving this problem, since most of the low-quality products are sold in the "gray" sector of the economy. Therefore, targeted actions of sellers of high-quality products aimed at providing information to customers are needed. The reputation of the manufacturer and seller is the most effective method of believing buyers. The manufacturer with a high reputation, the sale of poor-quality goods is usually unprofitable, since the seller carries losses from the loss of reputation - in the future he will not be able to sell its products at the price of high-quality goods.

Reputation is almost always evidence that the seller will not use asymmetrical information about the quality for the sale of low-quality goods. But, unfortunately, asymmetric information on quality can be used for the sale of low-quality goods, firstly, manufacturers working under well-known brands, secondly, trading firms working under the confidence of stamps. In addition, the reputation can not serve as a signal of quality and in the case when a new company is included on the market.

In classical economic theory, an abstract model is used, which suggests that information is distributed symmetrically in the market with high competition, i.e. All participants have the same access to it. The uncertainty is completely absent, which allows the use of available tools and resources in the most efficient way. But in real life, the model of perfect competition does not exist. The asymmetry of information and uncertainty appear.

Asymmetric information - This is an uneven distribution of information about the product between the parties to the transaction. Usually the seller knows about the product more than the buyer, although there is also a reverse situation.

Markets with asymmetric information - These are markets on which some participants know more than others.

4 main causes of information asymmetry are distinguished:

1) Receiving information is associated with resource costs. In case of unreliability of information, its verification will require additional costs. Therefore, the subject does not necessarily seek more reliable information. A rational economic agent will not pay more than the level on which the limiting costs of obtaining it exceeds the income from its use.

2) information is not always reliable. Even if the information received by the economic agent today was accurate, tomorrow, it can be outrageless due to the change in the economic environment and it cannot be reeded for economic decisions;

3) A huge amount of information does not allow economic agents to collect and recycle the entire amount of information available to them due to limited resources. Therefore, the subjects of economic relations are forced to select for storage and direct use only the information that seems to be the most important thing, but they can take an incorrect decision and collect not what you need.

4) Not all economic agents are equally able to select, analyze and accumulate information, in addition, they have unequal knowledge and skills that would allow them to adequately rewind the incoming information.

The asymmetry of information prevents economic agents to behave rationally and is an obstacle to the use of efficient use of resources. The fact is that the existing transaction costs to collect reliable information can be very high and exceed the future benefit from possession of this full information. With asymmetric information, the principle of operation of the market mechanism is violated, since the price signals no longer reflect the real state of affairs. The common example of this is set forth in the article of the American economist J. Aerlofa "Limon Market": the uncertainty of quality and market mechanism "(1970), which describes the situation in the used car market.

Limon Market J. Aerlof

The work analyzes the market consequences of situations in which the seller knows about the quality of the goods more than the buyer. George Akerlof, Michael Spence and Joseph Stiglitz in 2001 received the Nobel Prize in economics for analyzing markets with asymmetrically accessible information.

As an example, Akerlof considers the market for used cars. Good and bad cars are sold in this market (in the United States, the Jargon Name of Bad Car - "Lemons").

You can consider three variants of market equilibrium, depending on the completeness and symmetry of information about the quality of cars.

1. Information incomplete and asymmetric. The true technical condition of the used car is much better known to the seller than the buyer, and when you buy it in advance, it is impossible to predict whether the car will be "good" or "bad." Since buyers cannot distinguish between good cars and lemons, both good, and bad cars are sold at one price. The buyer expects a car of some weighted average quality and is ready to pay for her some weighted average price.

Such a price may not arrange some of the sellers of good cars, they will refuse them to sell and will be forced to leave the market. As a result, the proportion of good cars on the market will decline, bad it will increase. Buyers will appreciate the change in the situation, their demand will decline. The declined price will still have some kind of good car owners to refuse to sell, the market share of good cars will still decrease, the price of demand will decrease, etc. This tendency of the deterioration of average quality of goods in the market as a result of caring from the market of high-quality goods received a name unfavorable selection . In the end, good cars may be completely displaced from the market, and it will establish the equilibrium of demand and suggestions of Limonov. Asymmetry of information in this case completely blocks transactions with good cars, although with the full awareness of buyers, these cars could sell and buy at their equilibrium price.

Locking would not arise in the case of symmetric information.

2. Information full and symmetrical. If the quality of a particular car was also known to the seller, and the buyer would have emerged two independent market - the market of good cars and the market of Limonov. The total sales would remain unchanged and all cars could be sold for an equilibrium price, which would be established on both markets in the interval between the price of the seller and the price of the buyer.

3. Information is incomplete, but symmetrical. Suppose that neither the buyer nor the seller does not know the quality of the chosen car random. Sellers and buyers know that cars differ in quality and know which qualitative characteristics and in what quantities are found in the total mass of goods, but do not know the individual properties of each particular machine.

In this case, there is a function of car supply, independent of their qualitative characteristics. The total sales still remains unchanged and all cars can be sold for an equilibrium price, the lower boundary of which is defined as the amount of the product of the seller's prices for a good and bad car to the appropriate probability of obtaining it, and the upper price of the buyer for a good and bad car for the probability His receipt.

Compared to the previous option, social well-being will not decrease. Part of the buyers will incur losses, paying for a low-quality car more than their actual readiness to pay. However, the other part of the buyers will win, paying the high quality car significantly less than they were ready. The same applies to sellers.

A more real example of such a market can be the electric bulbing market.

Output. Thus, in the case of symmetric information, the market may exist and develop. The asymmetry of information prevents the efficient work of the market. It is exposed to deformation, because Bad goods displacing good up to the complete disappearance of the market. In addition, asymmetric information leads to a decrease in public welfare.

Analysis of markets with asymmetric information

Insurance market

It is well known that people over the age of 65 are extremely difficult to acquire medical insurance. There is a natural question: why is its price not increases to such an extent to fit the increased level of risk?

The fact is that the patient is much better than the insurance company knows its state of health. Thus, we are dealing with asymmetry of information. If the price of the insurance policy will grow, then more or less healthy people will simply refuse insurance and only those who are confident that this insurance will be needed among the clients. Thus, the increase in the price of the insurance policy is associated with a decrease in the average level of health of the state of those who want to insure, which does not compensate for the risks of the insurance company, but only increases them.

In addition, the concept of the so-called "moral risk" exists in the insurance market.The moral risk is the behavior of an individual who deliberately increasing the likelihood of possible damage in the hope that losses will be fully covered by the insurance company.

A man who insured life and property feels more confident. However, this confidence on some is relaxing: they cease to perform the precautions that were mandatory for them before insurance. It increases the risk and makes a more likely an event from which a person is insured.

2. Labor market (Michael Spence model)

Workers know about their work skills more than entrepreneurs. An asymmetry of information arises. How to recognize a more qualified employee? The employer has an average idea of \u200b\u200bthe category of employees: He is known to the floor, age, education and some more characteristics. Wages are established by the employer based on its ideas about the average structure of the supply of labor. It can quite arrange employees with low business data, but may seem insufficient to an employee with a high professional level.

Separate attention should be paid to the employment of graduates. Under the influence of stereotypes, the employer builds a logical sequence: there is no experience - low labor productivity. A method of minimizing risk in this situation can be a low wage or employer generally refuses to host a graduate. The negative consequence is the low percentage of employment in the specialty among graduates.

The means of combating asymmetric information protrude various signals.

Michael Spence analyzed such a signal in the labor market as education. Education diplomas file an employer signal about the quality and productivity of a potential employee. Performance in school and university may indicate productivity in the workplace. A high-performance worker will have the lower partial costs of obtaining a diploma for education (for example, it spends less time to prepare for classes and homework). Since a more productive employee can earn more, he is interested in receiving a diploma for education as a signal to an employer about its higher performance. At the same time, Spence believed that the formation itself is only a signal, and not a guarantee of high-performance work. Education makes it possible to qualify for more paid work.

In order for this signal to be reliable, the execution of two conditions:

1) The level of education should be high enough so that employees with low performance could not get it. Otherwise, they will also receive education and will be able to deceive the employer.

2) The inability to obtain a certain level of education should be accurately alarmed that the performance of this employee is low.

Another means of combating the asymmetric information about labor resources is a trial period. It is carried out in order to verify the conformity of the employee entrusted to him.

Lending market.

How can the bank distinguish high-quality borrowers from low-quality? Obviously, debtors are better than the bank, know whether they will return the debt or not. Again the problem of asymmetry of information arises. Companies and banks must prescribe the same percentage for all borrowers, which attracts more low-quality category. Risk Distribution By increasing interest rates can be scared primarily serious customers who have moderately cost-effective projects and non-risk. Only unreliable borrowers will remain ready to agree to any interest rates, just to get a loan.

The means of combating the asymmetric information in this market is the "credit history", accessible by most banks using computer processing. It helps to distinguish low-quality borrowers from high quality.

Perhaps it will be useful to read: