In the arena of asymmetric information, standardization (for example, menus at McDonald's restaurants) is a substitute for:
A) quality.
B) government regulation.
C) reputation of individual sellers.
D) firms' distinguishing among buyers.
E) firms' segregation of buyers.

Question

Quizplus · Accepted Answer

In the arena of asymmetric information, standardization is a substitute for the reputation of individual sellers. When there is asymmetry of information between buyers and sellers, standardization can help to reduce the uncertainty faced by buyers by providing them with a consistent product or service that they know they can trust, regardless of which seller they buy from. This is what happens with McDonald's menus, which are the same in every restaurant and help customers to know what to expect when they order a Big Mac or a Happy Meal. This reduces the information asymmetry between the seller and the buyer, leading to a better outcome for both parties.

In the Arena of Asymmetric Information, Standardization (For Example, Menus