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Another small observation - the properties you described (asymmetric information, obfuscation, and a necessary purchase) apply to many parts of the healthcare market. I wonder whether it means that this market is dominated by lemons.

"Lemons" is not so much of the problem in healthcare because of the (over)prevalence of litigation as a remedy for failures.

I can't sue anybody for a year's salary if I don't like my mattress (I don't).

Instead the market is dominated with inflated prices and mostly harmless procedures and tests. Sometimes the information isn't asymmetric, it's just difficult or sometimes just not a habit to try to find the best prices.

Here's an example that blew my mind a while back:

I was helping a friend with limited income afford medication. Generic Prozac, an extremely common drug.

Here are the current prices at Costco (you'll find the same trend many other places).

FLUOXETINE HCL 20 MG CAPSULE x100 $17.03

FLUOXETINE HCL 20 MG TABLET x90 $141.09 ($156.77 for 100, the price is listed for different values)

Look at that, nearly a factor of 10! For the same drug in a gel cap instead of pressed into a tablet. This isn't cherry picking, you can find the same scale of differences anywhere. Sometimes a drug will be cheaper in a tablet, other times a cap.

We had to call the doctor to get a prescription for the capsules, but for someone on a not-so-far-above-minimum wage job, that was a huge difference.

I only figured this out because I was curious about the difference and wanted to find out the best price, then I was blown away when I saw the vast differences in price. Anyone _could_ do the same thing for all of their prescriptions, but insurance and apathy mean that nobody cares so the market is extremely inefficient.

Regions that spend more money on healthcare have little if any benefit from that investment. http://nationalacademies.org/hmd/~/media/Files/Report%20File... ~50% of all medicine prescribed in the US is useless to harmful. https://www.huffingtonpost.com/allen-frances/many-commonly-u...

So, no US healthcare is very much dominated by Lemons.

PS: Modern medicine delivers most of it's benefit from fairly inexpensive treatments.

Not only are half medications useless to harmful, most of the time side effects aren't ever disclosed. I'm still bitter about this due to being prescribed medication I would have never had taken if the potential side effects we're disclosed.

The pharmacy always gives you papers with all of the side effects, interactions, and instructions. Is that not good enough?

Is this a serious comment? Of course it's not good enough.

I'm supposed to wait until after I leave the doctor's office and fill the prescription to know the side effects of a medication I just spent money on? So if I don't like the side effects I have to make another doctor's appointment and wait until the doctor has availability?

So I go to my doctor and say "I have X problem." Doctor says "take these pills." I go to the pharmacy and read about the medication. I say "well these side effects don't look good, I don't want to take the medication." I go back to my doctor, the doctor says "here's some different pills" and I have to fill that second prescription and compare the two side effects.

No, that's not good enough.

There's also the problem that that information is given in a vacuum, there's no information given about what the alternative treatments are for your condition and what the side effects are for those alternative treatments. That discussion rarely occurs to my satisfaction at the doctor's office because oftentimes the doctor seemly doesn't know about the side effects or is misinformed.

This has just been my experience...

For me, the medication in question was given to me in an acute setting. I asked directly about side effects and I was brushed off as "oh most people don't have any side effects" or something of that nature. Especially when the medication is administered by a nurse and I was just given pills, I had to firstly ask what the medication even was.

Honestly, you seem like a somewhat difficult patient. If you want to be more involved in medical decisions, it takes time and effort.

"big issue I have with doctors, I don't know if they are going to prescribe me some bullshit"

You want a somewhat different relationship with a doctor, it probably is not going to be very easy if your attitude is like that and you are not particularly willing to spend time and make effort. Finding the right doctor for what you want can be difficult, especially when you yourself are difficult.

I read all of my prescription documentation, and if there is an issue I raise it with my pharmacist or my doctor. Sometimes I go out and find journal articles too.

Sounds like you are using the VA, I'd believe you if you said it was time consuming and the doctors didn't have enough time for you.

Did you ever read the information sheet they give with your medication?

Prior to Obamacare introducing some sanity to insurance spending/denial of claims due to pre-existing conditions, the health -insurance- market was dominated by lemons.

You would end up paying for a plan that would not not actually cover you when you had a catastrophic health event (Or would cover a lot less then you'd expect.)

I don't think the health care market is quite the same, because in the health care market, in most cases the people who are paying for the services are not the same as the people who are receiving them. The people who are paying for the services (health insurance companies) do not have the same issues with asymmetric information and necessary purchase: they can obtain much more detailed information than individual patients about the relative performance of health care providers, and they have the ability to switch which providers are allowed to participate in their plans.

The main problem I see with the health care market is just what I said above: the people who are paying for the services are not the same as the people who are receiving them. This means that the price signals the market is sending are not well matched with the actual value of the services to the people receiving them. Standard microeconomics says that such a market will be highly inefficient, which I think the health care market generally is. But "inefficient" is not quite the same as "dominated by lemons".

To be fair, who can really tell the difference between TVs in the store? The source is crap, the lighting in the viewing area is crap, the settings are totally unknown.. and the reality is, they'll all look good once you get them home.

I think he's close, but it's more that there are objective criteria for TV quality. My guess is that there are enough people who will only buy TVs with good reviews that manufacturers don't want to muddy the waters on their top-tier models. Low-end TVs sometimes still have store-specific model numbers.

For a mattress, a review is less helpful. Firmness is probably the most noticeable feature of a mattress, and what's good or bad is mostly a matter of taste.

I'd have thought most in store buyers would look at the name, then the general appearance, and then the sellers recommendation. Does the general public pore over reviews?

Indeed I'd imagine most would simply follow what "the expert" tells them. When it appears to go against their view they'll say "your the expert" and go along with it.

Sadly I think "the expert" is most likely selling according to the profit margin/bonuses.

As long as the choice isn't dire for the customer then they'll come back in 2-3 years and do the same.

Consumers are a lot less discerning about TVs than you think. Most consumers only care about size and maybe resolution. The TV market is dominated by low end brands.

The TVs that are sold with huge discounts that everyone kills themself trying to get on Black Friday are the cheap in-house brands that will probably crap out in a couple years.

I agree, but is that a bad thing? I've had two cheap TVs that went out after 5 years and the TVs - equally low end - were a lot better.

I can't parse this-- yes, a TV failing after 5 years is bad. Did you mean.. the equally low end TVs were a lot better than the black friday no-name deals? (which, from what I've seen is not true.. often black friday deals ARE brand names).

Or are you saying the replacement after 5 years, a low end, was much better than the previous one it replaced? But you said they were both better, not the newer one was better.

I left off a crucial statement.

I bought two lowend 32 inch TVs five years ago. If I remember correctly, they were about $350. I replaced them with TCL Roku 32 inch TVs for $169 (regular price). The Roku TVs were much better - smaller bezel, better pictures, and the Roku smart TV platform is the best you're going to find as far as features, interface, etc.

Ah, okay. So you're saying the no-name cheapos are better (and cheaper!) than the low-end of the brand names.

> You can easily test TV brands by going to a store and looking at them. You can't really test different mattress brands in a store; yes, you can lie on them, but in my experience at least, that doesn't give a very good prediction of what sleeping on the mattress long term will be like.

FWIW IKEA offered 90 days "trial" when I bought my last bed a couple of years ago.

I liked it for a few months so I never verified if their return policy worked.

A way to sell in an imperfect market is with branding. You, as the seller (or manufacturer), won't risk your hard earned reputation by selling a couple of lemons. Something like in the kitchen appliances market. You can't try a dishwasher nor a washing machine at the shop, but you know that you cannot go wrong with Bosch (no affiliation, I'm just satisfied with them).

The interesting part in my opinion is that in the mattress market this branding system seems not to work.

Works great until the brands start cutting corners.

And Bosch is on of those brands, to my knowledge. Bosch is one of the main examples of a split brand: They compete with Miele and the other premium Germany made brands with their deluxe models that are still made in factories they control, but they also compete with Zanussi etc with their basic lines, without the 15+ year warranty, and definitely not made in Germany.

Here I'm not sure the name Bosch is worth anything, and you might as well buy a Zanussi, our student flat had all Zanussi stuff and nothing broke in the 10 years they had them.

Branding depends on a reputation.

That reputation needs to be established by either word of mouth or general reviews. For mattresses, word of mouth isn't that good because people have different preferences.

Moreover, general reviews have essentially been corrupted by 'astroturfing' reviews. That is, almost all mattress reviews that are prominent are financed by a manufacturer. They then use publishing clout or heavy SEO to be found over any possible remaining reviews. Besides, single user reviews aren't that valuable because of personal preference and lack of comparison mattresses. Thus, it is really hard for an honest reviewer to start. They need capital to get sufficiently many mattresses. Then, they need to be found, thus going up against the heavily SEO'd dishonest sites. Finally, they need to stand up to all attempts from the mattress companies and dishonest reviewers to actually survive.

Finally, bad-mouthing brands' product quality is again stymied by personal preference and the small number of mattresses anyone sleeps on.

>You can easily test TV brands by going to a store and looking at them

And a store can easily game this by selecting the most pleasing settings on the most expensive TVs.

Even if stores do this, it's not the same as trying to get customers to buy a lemon. It's basically upselling, which is a common technique, yes, but the products are still competing on features and price--more precisely, on the balance of features vs. price.

> The result is a standard asymmetric information scenario

I think you nailed it with that. But now the question is: can we do something about it?

It depends on whether the asymmetric information problem is fixable. The usual reason why fixing it is hard is credibility. For example, in the used car market, a seller who happens to have a car that is not a lemon has no way of credibly conveying that information to prospective buyers, since sellers of lemons can say all of the same things he can say. So the seller of a non-lemon will get no buyers unless he is lucky enough to come across a buyer who actually can tell that his car is not a lemon--i.e., for whom the information is already not asymmetric, without the seller having to say anything.

Note that branding is not necessarily a solution to this problem, except possibly in the short term. That is, a seller can work to establish a brand reputation--which, btw, will generally (by standard game theory arguments) include costly signaling, such as expensive advertising, that sellers of lemons cannot duplicate. But as soon as the brand reputation is established, the seller has an incentive to take advantage of it by gradually reducing quality. Buyers know that this incentive exists, which limits the degree to which they are willing to believe even costly signaling; and therefore establishing a brand reputation is not a long-term stable solution to asymmetric information.

The other potential solution is for credible third parties to exist who give unbiased and accurate quality ratings to the various sellers. But this, of course, is vulnerable to being gamed: sellers have an incentive to offer rewards to the third parties in exchange for more favorable ratings. This then becomes just another version of the brand reputation situation above: buyers know that the third parties will be tempted to sell better ratings to sellers, which limits the degree to which those ratings will be believed.