“There is often information available to us that we fail to see”
When I was growing up, I would always go food shopping with my dad on the weekends so that he could teach me all of the grown-up secrets of selecting ripe produce (either that, or my mom just wanted to get me out of the house). Regardless, many weekends were spent browsing the aisles of NoFrills in Toronto, securing our weekly feasts.
Being young and easily interested, my favorite things to pick were those with a complicated selection process (maybe I should have recognized my academic proclivities at a younger age), and none of these were more interesting than eggs. Perhaps not the most complicated selection, but there was a deliberate process – it was necessary to check each individual egg and ensure that it had not cracked (either up top where you could see it, or near the bottom, where you could not). This was achieved by lightly moving each egg in a circular motion and trying to notice any granularity or sound which could indicate a broken shell. If a carton contained an egg that was deemed to be broken, this was even more exciting, as our efforts had rescued us from the nightmare of a less-than-expected number of eggs.
I’m not sure if this egg-checking exists in every household, but thanks to my dad, it is a habit that has stuck with me well into my adult life, similar to listening to Counting Crows and sneezing too loudly.
As my adult self went on with the day’s food shopping errands, I started to think of my dad’s selection process and wondered if there was anything I could do to increase its efficiency as a show of love and appreciation for his many years of fatherhood and wisdom (I’m not sure if this is his ideal gift, but I’ve been told that it’s the thought that counts).
As I dissected this problem of egg selection, I came upon two insights that showcase examples of a terrific concept in economics – information asymmetry.
Our first example has to do with where in the fridge to select the eggs from. Imagine you’re looking into the NoFrills fridge, and there are 50 cartons stacked. All the cartons look the same – at least as far as you can directly observe – and as such, your selection would seem random. But the positioning of the eggs is not random. They have been placed there by an employee who has information about the eggs that you do not. The employee refilling the fridge knows which eggs have been there from the last shipment and which eggs are only now being added. To move through the inventory as smoothly as possible, they will place the freshest eggs in the back, where most people won’t bother to go. The employee has superior knowledge, and by recognizing this, you can use their information to improve your own outcome. Hence, the further back you reach to select your carton, the fresher the eggs will be.
Although this introduces a new dimension of freshness into egg selection that I’m sure my father will appreciate, I still haven’t introduced any new insight into the cracked-egg phenomenon which so influenced my childhood. To deduce a new insight, I walked the process back:
Step 1: Grab a box (typically from the front or middle, where it’s most accessible) and check if it’s cracked.
Step 2: If it’s not cracked, take it. If it is cracked, put it down and repeat Steps 1-2.
The insight came when I realized that I have to put down the cracked box. Once I realize an egg is cracked, I have no interest in the carton- my only interest is to discard it quickly so I can to find a new one to take its place. And so, I put it down in the most accessible spot – the front of the fridge.
As you can see, anybody that follows this egg-checking routine will contribute to this phenomenon by shifting the broken-egg cartons towards the front. This is unfortunate because most people grab the first box they see, and our self-serving behavior increases the probability that these poor fools wind up with subpar eggs.
But that is neither here nor there.
What is here and there, again, is information asymmetry – previous shoppers have gained information about the eggs through their own selection. Assuming they acted efficiently and rationally, you can deduce that the front of the fridge likely has a larger proportion of cracked eggs than the rest. Furthermore, we can assume that few will reach into the very back of the fridge, and so the proportion of those broken cartons should remain somewhat unaffected.
Based on these two insights, we can determine the following should be true about egg cartons based on fridge location:
Front: Least Fresh, Most Cracked
Middle: Medium Freshness, Least Cracked
Back: Most Fresh, Medium Cracked
My gift to my father is an optimal strategy for egg carton selection, and as such, like any good economist, I will give him a noncommittal, not-particularly-useful answer – depending on whether he prioritizes the probability of a cracked egg or its freshness, he should select a carton from either the middle or back of the fridge.
But given the fact that the back of the fridge is notoriously difficult to reach (and I don’t envision my dad falling into the fridge just to reach the last row), I would likely recommend the middle for his everyday shopping needs.
Is this information useful? Not particularly. Moreover, it’s likely such a minuscule difference that its effects would be overshadowed by a random fall during shipping or how much the employee conducting stocking is in a hurry.
But it does demonstrate a point – there is often information available to us that we fail to see. The used car salesman will show us the car he’d most like to get off the lot. The business will recommend the sale that brings the highest margin. The “too good to be true” house that’s been on the market for a while might just be. Is that information useful? Maybe. Probably. But regardless, at least you’ll know from where in the fridge you should grab your eggs.
Leave a Reply