Information Asymmetry and Value Added

Information Asymmetry

• Information asymmetry occurs when one party in a transaction has more information than the other.
• Experience goods refer to products whose quality is only known after consumption.
• Gatekeepers are intermediaries that control access to a market or product.
• Supply-induced demand is when the offering of goods or services creates a new, previously unmet demand.
• Consumption capital is an investment in the knowledge, skills, and habits that enhance one's ability to consume and experience certain goods.
• Bandwagon effects occur when consumers buy products because others are buying them.
• Network effects describe how the value of a product or service increases with the number of users.
• Non-market evaluation often involves willingness to pay as a measure of value.

Value Added

• Search costs are the expenses incurred in finding information about products.
• Thick markets are characterized by high transaction volume, while thin markets have low volume.
• Value added is the increase in the market value of a product or service resulting from a particular stage of production.
• Value added differs from GDP as it focuses on value created at a specific stage, while GDP measures overall output of an economy.
• Value added is calculated by subtracting the cost of inputs from the revenue generated.
• The art and cultural industries' value-added data are crucial for understanding their economic contributions.

Welfare Economics

• Pareto optimal is a situation where no one can be made better off without making someone else worse off.
• Pareto improvement is a change that makes at least one person better off without making anyone worse off.
• Kaldor-Hicks compensation is a criterion for evaluating economic efficiency that considers whether potential gains from a change outweigh potential losses compensated.
• Market welfare can be shown graphically with consumer surplus and producer surplus.
• Consumer surplus is the difference between the price consumers are willing to pay and the price they actually pay.
• Producer surplus is the difference between the price producers receive and the minimum price they would accept.

Government Policy/Regulation/Crowding Out

• Governments intervene in market prices to control distortions or ensure social welfare.
• Price ceilings limit price increases, while price floors prevent price decreases.
• Tariffs and quotas restrict international trade.

Price Discrimination

• Price discrimination is the practice of charging different prices to different customers for the same product or service.
• First-degree price discrimination involves charging each customer their maximum willingness to pay.
• Second-degree price discrimination involves charging different prices based on the quantity purchased.
• Group price discrimination involves charging different prices to different groups of consumers.

Globalization of Cultural Trade

• Exports are goods and services produced domestically and sold abroad.
• Imports are foreign-produced goods and services purchased domestically.
• The balance of trade is the difference between the value of a country's exports and imports.
• The informal economy includes economic activity not formally measured or reported.

Market Structure

• Performing Arts, Film, Music, Publishing, Broadcast, Museums and Cultural Heritage have unique market structures.
• Cost spreading allocates fixed costs across multiple units.
• The superstar effect highlights certain artists' disproportionate popularity.
• Gatekeepers influence the flow of information and opportunities across industries.
• Sunk costs are irreversible investments.
• Cannibalization occurs when a new product reduces sales of an older product.
• Shadow pricing estimates the value of a good or resource not traded in a market.

Labor Economics

• Labor markets function differently depending on the field.
• The supply of labor in arts is often influenced by various factors and can be backward-bending.
• Backward-bending supply curve for labor describes decreased supply as wages rise beyond certain points.
• Demand for artists' labor varies depending on popularity and skills.
• Gig economy features independent workers.
• Artistic motivation can be intrinsic (internal drive) or extrinsic (external rewards).
• Training in the arts involves developing craft skills.
• Sorting models in labor markets describe different skills and abilities.
• Human capital theory explores how individuals' skills and knowledge affect their productivity.

Explore the concepts of information asymmetry and value-added in markets through this quiz. Learn about experience goods, gatekeepers, network effects, and consumption capital, among other important economic principles. Test your understanding of how these concepts affect consumer behavior and market dynamics.