Those most familiar with the cattle trade agree that there often exist wide differences between the actual selling price of cattle in the market and the previous estimate by the feeders sending them forward as to the prices they should bring. The small feeder, who seldom follows his cattle to market, has a poor chance to learn market conditions and requirements, but the regular shipper has an excellent opportunity to do so. Feeders must rely largely upon the market reports for their knowledge of the condition of the cattle trade... Inability on the part of the feeder to interpret correctly market quotations places him at a decided disadvantage either in selling his cattle to a shipper or in shipping to the open market.--Market classes and grades of cattle with suggestions for interpreting market quotations, Herbert Mumford. (1902)Beef isn't assigned to quality grades--like prime, choice and select--to help buyers know what to buy. It's assigned quality grades so producers know what to produce. Mumford's groundbreaking work led, eventually, to the voluntary grading of beef and other commodities by the USDA.
Raising cattle that has a higher proportion of well-marbled, tender, Prime muscles is more expensive than raising one full of chewy, touch Select muscles. So even more than needing to know at what price they can sell cattle, cattlemen need to know at what price they can sell different quality cattle, so they can figure out whether it makes business sense to spend the money to raise high-quality beef.
Markets not only consume information, they generate information: primarily information about demand at different price levels. Price information, of course, is what drives efficient allocation of resources*. So, lack of public information about quality causes both
- Problems for the buyer when the seller knows quality but the buyer doesn't, and
- Problems for the seller, when the buyer knows quality but the
In the lead-gen world, I heard over and over from lead generators that it took at least a year before a newcomer could make money. Not because they couldn't generate quality leads at a decent cost, but because it took a year to realize just how much the companies buying their leads were screwing them on price.
In the display ad world, the buyers have access to all the information they need to judge quality--context, customer, behavior, etc. But the sellers, the publishers, have let themselves be isolated from the information they would need to link quality and price on any inventory they sell through markets***. It shouldn't be surprising that the prices they get are rock bottom.
* I'm sure you've read about it, but if you haven't actually read it, do: Hayek's The Use of Knowledge in Society. It's a good read, and short. It's also explains the key concept in how our economy works.
** If neither knows the quality of the good being sold, a robust market is still possible. The stock market, for instance.
*** Including the ad nets, the ad exchanges and the ad optimizers, all of whom run a type of market.