The price that investors are willing to pay is based on a valuation formula that considers past performance, expected performance, future market conditions, and so on. Evidence of near-perfect markets is springing up across the Internet. Consumers offer information on their willingness to pay for a seat or a room, and sellers offer the price at which they can make that seat or room available and still make a normal profit. Another example is Mercata Inc., which lowers the price based on the number of bidders for a particular item. Near-perfect markets in which the consumer can offer a price are the easiest to create using the medium of the Internet.
Most consumers go through a budgetary analysis for luxury items such as vacation travel.
They know to the nearest dollar what it would cost to spend their vacation at Aunt Midge's house. So they can make an online offer for a Florida vacation at a price equal to the cost of a vacation with Aunt Midge or add a few dollars to see if there is a seller for a Hawaiian vacation. If there are no sellers, just remind the kids how much they love playing badminton in Aunt Midge's backyard. But for most goods, information doesn't exist because consumers do not have an explicit price in mind they would be willing to pay. Typically, they make needs-based decisions on seasonal or style changes or depletion of household goods.