Economics Help

consumers receive a product but hardly ever have any information (especially before going to a restaurant to which they’ve never been) about what happens in the kitchen: cleanliness, sanitary conditions, the quality of ingredients, is the organic stuff on the menu really organic? will the service be good, etc.

To remedy some of this information asymmetry, government intervention is used in the form of health inspections, regulations on food quality, regulations on employee pay and benefits, etc.

1) Can you think of ways that government interventions may fail to address consumer concerns about restaurants? Can you think of other potential interventions or regulations that could be imposed instead that would address these concerns better than what we have now?

2) Can you think of private alternatives to government interventions that address the consumer information problem? How effective are these private alternatives in a) uncovering hidden information and b) causing restaurants to change their behavior if they are doing something to which consumers object?

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