Keeping this premise in mind, we explore a range of possible government interventions and assess the costs and benefits of supplementing or displacing market forces. We prefer the rifle to the shotgun. Our policy proposals are aimed at a small, but significant, group of retail markets where we believe some forms of government intervention are justified. The retail car market serves as a paradigmatic example for many of our theories. We suggest that buying a new car would be easier and more equitable in a world where retailers revealed their true costs.
Markup information can thus serve as a dramatic substitute for consumer search.
We also suggest that markup revelation would truncate the bargaining process at each dealership. The possibility of hoodwinking uninformed buyers into purchasing at a high markup would diminish as the excessive profits would be directly revealed. There would most likely be fewer rounds of bargaining and less price dispersion in the final offers. Finally, we imagine that retailers might begin to compete on the basis of markups. Retailers might advertise not to sell cars above a certain markup level.