For me, the Madonna experience was an example of a market failure. The seller of the product may know something about its quality. The buyer of the product, though, has to take its quality on trust simply because it's not possible to inspect the potential purchase before parting with one's cash. Of course, it's always worth reading the views of critics (they exist in part because markets do indeed fail) but, as there was only the one concert at Wembley, you'd have to draw conclusions from her performance at other venues. On the night, some people walked out but, as the show was costing punters around £1.50 a minute, the majority presumably thought they should hang around.
This issue of trust is a problem across a wide range of markets. Information failures can destroy markets remarkably quickly. Financial markets, in particular, rely on trust. Indeed, those familiar with the banking system know that it depends entirely on trust: no bank could repay all its depositors in one day because the money simply doesn't exist (which is one reason why, when the run started, Northern Rock was such a disaster). For the most part, trust is maintained but, once in a while, things go horribly wrong, perhaps because those who were trusted abused their positions. And, as trust disappears, once-respected brands become vulnerable. Madonna, be warned.
The managing director of economics at HSBC on trust and hard candy.
No comments:
Post a Comment