Scott Maynes’ Perfect Information Frontier
Sherman D. Hanna, Professor, Ohio State University, hanna.1@osu.edu
I knew Scott Maynes only through his writings and from talking to him at ACCI conferences. He had a substantial influence on my teaching, and I used his 1976 textbook for a number of years of teaching a “Consumers and the Market” course. (Anyone who teaches such a course should have a copy of his textbook as a resource — see the Amazon link below.)
Being trained in economics, I struggled in teaching about consumers in the marketplace, as mainline economics had provided me with little background. Today there is much more relevant literature, though the Maynes’ Decision-Making for Consumers textbook still is a good way to start thinking about the topic for undergraduates, especially if you want to go beyond a listing of consumer problems and laws. The Perfect Information Frontier graphs in his textbook and various articles over the past 31 years provide a useful way of analyzing markets for goods and services.
Scott Maynes’ textbook discussed consumer problems, but he believed that information was the most important factor in achieving good results for consumers. Obviously there are problems with consumers not bothering to get information, and Maynes’ textbook includes a discussion of “harried consumers.” But his ideal consumer was based on himself, the rational Consumer Reports reader, frustrated at not being able to get enough information to make the optimal choice. Today the internet provides many times the amount of consumer information available in 1976, in a small fraction of the time it took to be available 31 years ago, but the challenges for consumers to make good decisions remain.
I remember being struck by the differences between consumer markets and financial markets. Maynes illustrated with graphs of the Perfect Information Frontier with various products that many consumer markets were informationally inefficient, with the result that consumers might pay too much for a given level of quality, or get lower quality than they could have obtained at the same price. In contrast, as Burton Malkiel pointed out in his book A Random Walk Down Wall Street, originally published in 1973, financial markets tended to be efficient. By shopping you could find bargains with most consumer products and services, but it was very difficult to find a bargain with financial investments. The difference was in the amount of information easily available. The increase in free information on the internet should have made consumer markets more efficient, though the goal of marketing tends to make it more difficult for consumers to evaluate products. Producers still try to differentiate their products, since commodities become subject to brutal price competition that destroys profit. Some of the product differentiation benefits consumers through useful features, although other types of differentiation simply confuse consumers.
One irony of both financial and consumer markets is that most investors and consumers get a free ride because of the careful investors and shoppers. I can throw a dart at the stock market listings. (That example is becoming obscure as it is harder to find newspaper listings of stocks.) I can be a lazy shopper and still do pretty well because sellers have trouble telling the difference between me and the Scott Maynes of the world.
I have often thought that the Perfect Information Frontier would be a useful framework for marketing, but I have found only a few examples of marketing courses and research using it. One problem is that in order to use it, you must be able to reduce the quality of a product to one dimension so you can rank varieties from best to worst. Consumer Reports magazine does that, and some specialized publications and web sites do that, but to some extent there is no accounting for taste. There is also the issue of status products, which some consumers will pay a premium for not because of quality but because the perceived value of communicating how much you could afford to pay for the product.
If you read Scott Maynes’ obituary, you will learn that he spent many years on survey research issues, but consumer decision-making was the topic that captured his enthusiasm. He will be missed at ACCI meetings.
Some links related to Scott Maynes
Web page for Scott Maynes on the Cornell University web site.
Decision-Making for Consumers: An Introduction to Consumer Economics
(Hardcover) by Edwin Scott Maynes (Author) Prentice Hall College Div (June 1976)
Ithaca Journal link for obituaries (search for Maynes)
A little conference paper applying Maynes’ concepts about the Perfect Information Frontier: