When mobile phones were introduced to a fisherfolk in Kerala, India, suddenly the surrounding markets had the same price for fish. Before mobile phones, fishing boats didn’t know where best to bring their catch. Maybe one day they would converge on three markets, overloading them with supply and leaving the other markets scarce of fish. Where there was too much supply, the price of fish was low. Where fish was scarce, the price was high. With mobile phones, fisherfolk could call from the boat first and determine which market was best for them. This demonstrates what economists call the law of one price. Can you think of examples where ICT reveals the law of one price? …. Next time, how shopping online eliminates information asymmetries….
Reference: “The digital provide” in Quarterly Journal of Economics, August 2007, by Robert Jensen.