The information advantages that sellers, service providers and intermediaries enjoy over consumers are one of the most enduring distortions in modern capitalism. In 1970 George Akerlof, a Nobel-prizewinning economist, published a paper on the market for used cars. He showed that when buyers cannot tell if a car works properly or is a "lemon" with hidden problems, they assume the worst; honest sellers then stay away, the quality of service declines and fewer consumers fulfil their needs.
The internet reduced some asymmetries. Services such as Carfax let used-car buyers check a vehicle's history. Ride-hailing apps such as Lyft and Uber ended the circuitous-but-profitable taxi route. Tripadvisor sent tourists to restaurants that provided decent meals. In the early 2000s there were more than 20 branches of Angus and Aberdeen Steak Houses, a notorious tourist trap, in London; by 2025 there were four, and the surviving ones were better. About 25% of American consumer spending goes on goods and services with severe informational asymmetries, down from 30% at the turn of the millennium. A British government-commissioned study in 2024 estimated that citizens lost 2.5% of GDP a year from buying goods and services of unacceptably poor quality or with other defects.
As AI goes mainstream, chatbots are giving consumers expert advice. CarEdge uses an AI negotiator to haggle with dealerships on vehicle prices; Pruvo monitors refundable hotel bookings and rebooks when the rate drops. Over half of consumers have used or would use AI to answer a legal question, according to a survey by Clio, a software firm. By late 2024 roughly 18% of financial consumer complaints involved LLM-assisted writing, according to research by Weixin Liang of Stanford University. Analysis of over 1m complaints to America's Consumer Financial Protection Bureau, by Minkyu Shin of City University of Hong Kong, found that 49% of AI-assisted complaints received relief, compared with 40% of human-written ones. An experiment by Ryan Shea and colleagues at Columbia University found that users interacting with an AI model improved their negotiation performance significantly in used-car and rental negotiations.
Providers and retailers are likely to fight back with their own AI tools. Amazon listings are already swamped with AI-generated product descriptions. Companies are working on "generative engine optimisation", which could result in chatbots putting out information favourable to their product.
For children with short attention spans: boomerangs that don't come back.