Contractor Signaling

by Jean

Contractors VansI thought I’d explain my “Van of the Week” posts a bit, since I’ve gotten a few questions. When I started remodeling my house, I talked , actually it was more like complained often, to my economist friend about the process. I explained to her that even though I had worked in an architecture office and had done several remodeling jobs, I was finding it incredibly difficult to complete my own home.  When you work at an office you get handed a Rolodex of high-end contractors and an office of people who have already worked with them. Without this leg up, I just didn’t have enough information about the contractors I was interviewing to make informed decisions.

She told me that the problems I was facing sounded like those created by a market with an information asymmetry. Here’s what Wikipedia says:

Asymmetric information models assume that at least one party to a transaction has relevant information whereas the other(s) do not. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement whereas the other(s) cannot.

And this led me to this other Wikipedia entry:

Signaling took root in the idea of asymmetric information . In his seminal 1973 article, Michael Spence proposed that two parties could get around the problem of asymmetric information by having one party send a signal that would reveal some piece of relevant information to the other party. That party would then interpret the signal and adjust her purchasing behavior accordingly — usually by offering a higher price than if she had not received the signal.

So this got me thinking, looking and obsessively cataloging all the signals that contractors send to homeowners. There is definitely a very clear pattern, graphic style and nomenclature that they use, and thus my “Van of the Week” posts.

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