“What Do You Know?” (Information Asymmetry)

August 6, 2012
Posted by Jay Livingston
(Cross-posted at Sociological Images)

I bought a used book on Amazon, and when I opened it, I felt as though I were an unintentional eavesdropper.  I had stumbled into a triangle of information asymmetry. 

Examples of asymmetry and other information distributions usually come from games or economics.  There’s “perfect information” (chess) and “imperfect information” (card games).  The best known example of “information asymmetry” is still Akerlof’s “The Market for Lemons” (cars, not fruit). 

In all these examples, the information is about objects.  But in everyday life, information is often about people, not chess pieces or cards or Camaros.  Perfect information is rare.  I know more about myself than you do, and vice versa.  Usually.  But what if you know something about me that I don’t know? What if you have seen my hole cards, and I haven’t?* 

Last week’s  “This American Life” started with a story about that unusual arrangement.  But the information wasn’t about a man’s cards, it was about his life (or more precisely, his wife).

The man discovers that his wife is seeing another man.  Even though the couple were in the process of separating, he is devastated.  He turns, as Ira Glass says, “to someone he knows will be on his side, will help him make sense of this, tell him what to do – his lawyer.”  For a tear-filled hour, he talks to his lawyer.  Only later does he discover that the lawyer is the man his wife has been having the affair with.

The information – who knows what about who – badly lacks symmetry.  The man, talking to his lawyer, lacks a crucial piece of information, information that the lawyer could provide.  Instead, the  lawyer pretends to be ignorant and lets the man go on for an hour talking and weeping.

(This three-person asymmetric structure, save for the lawyer-client angle, is identical to that of the Salinger story, “Pretty Mouth and Green My Eyes.”)

My own used-book story is a less dramatic version of this same asymmetry.

The book was listed as “used – like new, signed by the author.”  I considered getting a clean copy for the same price from a different seller but went with this one. It arrived – gift wrapped, for some reason – and indeed, the book was like new.  Unread.  And it was not just signed.  There was a personal message: “For Gerry,** since you’re so much a part of this.” 

I was sure I knew who Gerry was – the name (the actual name, not this nom-de-blog) is not a common one.  I remembered that Gerry, now a professor at a major university, was a student of the author’s long ago. 

They live in the same area, and I assume they have a closer relationship to one another than I have to either of them.  (I know the author slightly, Gerry not at all.)  After all, there’s that inscription in the book.  But I now have a piece of information that says something about their relationship, a fact known to only one of them – Gerry.   And neither of them knows that I am now in on this bit of information. 

I could let the author in on this information. “Hey, did you know that copy of your book you inscribed so nicely?  Gerry didn’t even read it and then went and sold it to some resale shop.”  But of course I won’t.  Still, this little incident gives me some sympathy with that lawyer.

The “This American Life” story made him out as the bad guy, and in fact, he was charged with professional misconduct.  At the disciplinary hearing, when asked why he didn’t just tell his client to find another lawyer, he says, “Well, to be honest, it was very awkward. It was one of those things I just wasn't sure how to bring up or when to bring up.” 

Neither am I.  And I’ll never have to.

* A symmetrical version of this self-ignorance is the basis for a card game that I know as One-Card Schmuck but which I can find on the Internet only as Indian Poker or Blind Man’s Bluff (here, for instance).  The Indian Poker is definitely un-PC, Blind Man’s Bluff more accurate.  But One-Card Schmuck captures the essence of the game.

** Not the real name, and deliberately gender-ambiguous.

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