The company you are working for has a problem. Its products are clearly superior to competitors but consumers seem unwilling to buy your products over the more well-known competition products. The managers have proposed certain solutions: 1) Expand the advertising budget to increase brand awareness; 2) Cut the prices to encourage cost-conscience buyers.

Required:

What is Information Asymmetry?

From Akerlofs perspective, why are consumers more likely to buy from your competitors when you know your product is better?

Having read Akerlof in your Accounting Theory class discuss the pros and cons of each of these approaches in addressing the fundamental problem of Information Asymmetry.

Which approach do you think will be most effective in accomplishing the goal of communicating quality and reducing the uncertainty of the consumers?