A service like CARFAX, which provides a used car buyer with the complete history of a used car, is profitable because of the problem of asymmetric information.

Question

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Asymmetric information refers to a situation where one party has more or better information than the other party in a transaction. In the case of buying a used car, the seller often has more information about the car's history than the buyer. This creates a problem for the buyer as they may unknowingly purchase a car with hidden issues. Services like CARFAX aim to provide the buyer with the complete history of the car, solving the problem of asymmetric information, and thus making it profitable.

A Service Like CARFAX, Which Provides a Used Car Buyer