Today is the day of online. Most of the thing that we are doing is done through online. Starting from ordering food to buy a flat is available online. As all this can be done through online then how can be a purchase of clothes fall behind. We are getting a variety of product as our choice with great price variation. This is the reason that most of the people now preferring to online buying. The same brand of clothes we are getting at a cheap price than that of the offline market so why we will go to the offline market.
But sometime when don’t know about a product and we like that product, then we go for the people review section and according to that review, we select our product. But we don’t consider the fact that review can also be a paid one. Sometimes to increase the demand of their product they pay people to write a good review. In this type of situation sometimes we get a good product as we will buy and sometimes we get a bad product. This purchasing of a bad product looking at the customer review and rating is called Adverse Selection.
Most of the time we are going for these type of product because for the reason that we are getting this at a cheap price. As we are ready to pay more for that type of product and we are actually paying less than that amount so we happily buy that product and this thing is called as Consumer Surplus. The same opposite also happens sometimes for the seller also. Sometimes seller will to sell it at a low price but the customer don’t bargain or may for any other reason he pays more and this thing is called as Producer Surplus.
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