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Asymmetric Information in Vietnam’s Motorcycle Helmet Campaign

As a matter of fact, asymmetric information in relation to the market is connected with a common situation when one party knows more than another one. For instance, sellers may have considerably more information about the quality and peculiar features of their product in comparison with consumers (Pindyck & Rubinfeld, 2018). In addition, asymmetric information may explain society’s multiple institutional arrangements, such as companies’ insurances, warranties, contracts with included rewards and incentives (Pindyck & Rubinfeld, 2018). Asymmetric information frequently leads to market failure when information from the sellers of high-quality products and services cannot be provided to customers, and these products and services are subsequently replaced by low-quality ones.

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The phenomenon of the existence of products of different qualities that are sold at the same price “because buyers or sellers are not sufficiently informed to determine the true quality at the time of purchase” is called adverse selection (Pindyck & Rubinfeld, 2018, p. 648). It may be exemplified by the situation with motorbike helmets (MBH) in Vietnam. Due to the increase of the population’s income caused by economic growth, the development of road traffic, a weak public transport system, and the policy of trade liberalization, the number of motorbikes in the country has substantially increased. However, at the same time, the number of accidents with the involvement of motorbikes that resulted in traumatic brain injury or death increased as well. Consequently, due to considerable total damage from traffic accidents, economic loss, and medical costs, in 2007, the Government of Vietnam initiated a mandatory implementation of the MBH team for all users of motorbikes on all roads throughout the country (Goldman, 2017).

Regulations concerning MBH were subsequently forced, and people started to buy them increasingly. However, from a micro-economic aspect, these policies have led to negative outcomes. In general, in response to the growth of the demand, multiple companies started to produce and sell MBH in various locations. According to new rules, all samples had to be provided with the conformity mark, information about a manufacturer, origin, size, and the year of manufacture in order to confirm their quality and comply with the standards designated by the Ministry of Science and Technology. However, the reality subsequently showed that the majority of MBH in the Vietnamese market have highly poor quality (Goldman, 2017). In other words, regardless of strict mandatory regulations, a substantial number of manufacturers empowered by the inability of consumers to receive legit information concerning the genuine quality of helmets, used the simplest materials with the total average cost of no more than 20,000 VND and sold it MBH clones as high-quality samples for 150,000 VND per item. In addition, they provided fake conformity marks and information concerning their samples’ origin in order to sell as many MBH items as possible. As a result, low-quality products almost completely drove out high-quality goods (Pindyck & Rubinfeld, 2018).

From a personal perspective, this asymmetric information situation will lead to highly negative consequences, especially for people. First of all, certificated and conformity marks may be counterfeited, however, the genuine quality of MBH will be defined during the traffic accident. That is why, as the general quality of samples in the market is poor, the number of serious road traffic fatalities will not decrease. Consequently, economical loss related to the inability of people with traumatic brain injury to work for a considerable period of time will remain unchanged or change insignificantly. In addition, asymmetrical information in the form of adverse selection may have a highly negative impact on customer loyalty to the local market of MBH in general that may experience the consumers’ demand shift (Pindyck & Rubinfeld, 2018). In other words, when people realize that any certified high-quality sample may be fake, they stop trusting any manufacturer in the country. As a result, both the number of people who will order MBH from abroad to ensure their quality and the number of people who will ignore any protection as they will not want to spend money on low-quality items may increase.

It goes without saying that the government should intervene in this situation as its main goals concerning this subject are the provision of safe road traffic and the reduction of traffic accidents and economic loss. Probably, it should introduce the manufacturers’ registration and enforce its requirements to eliminate ethically compromised entrepreneurs who use low-quality materials knowing that their products will not save consumers in the case of the accident. In addition, it may control the agreements between manufacturers and insurance companies that may signalize the poor quality of products.

In general, in order to avoid the negative consequences of the asymmetric situation, customers should be provided with all necessary information concerning the product. The insignificant gradation of MBH quality may exist, however, people should be aware of it. In other words, if they buy a lower-quality product, they should be responsible for their choice. In this case, customer loyalty to the companies that manufacture appropriate MBH will increase. And it goes without saying that higher-quality and lower-quality MBH cannot have a common price. However, all MBH should provide safety regardless of their price as quality may be determined not only by the sample’s main functions but its comfortability and used materials. In turn, the proposal of the National Traffic Safety Commission to emboss the words “Helmets for motorcyclists and motorbikes” on helmets is controversial. On the one hand, the authorities want to reduce the amount of low-quality products with fake certificates. On the other hand, similar to conformity marks and information about MBH, these words on helmets may be counterfeited with time as well.

Reference

Pindyck, R. S., & Rubinfeld, D. L. (2018). Microeconomics (9th ed.). Pearson.

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Goldman, L. (2017). Head first: A case study of Vietnam’s motorcycle helmet campaign. AIP Foundation.

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StudyCorgi. (2022, August 16). Asymmetric Information in Vietnam’s Motorcycle Helmet Campaign. Retrieved from https://studycorgi.com/asymmetric-information-in-vietnams-motorcycle-helmet-campaign/

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StudyCorgi. 2022. "Asymmetric Information in Vietnam’s Motorcycle Helmet Campaign." August 16, 2022. https://studycorgi.com/asymmetric-information-in-vietnams-motorcycle-helmet-campaign/.

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StudyCorgi. (2022) 'Asymmetric Information in Vietnam’s Motorcycle Helmet Campaign'. 16 August.

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