Sample Essay

The information about a service or any product in the market ought to be given to all the parties involved so that one can make an informed choice, which is not the case with large financial institutions. In the case of fixed securities markets the buyer is made to understand that there are no risks involved when the fact is the risk is large enough to scare the would be investors. The TBTF in financial sector take the advantage of the loyalty of the customers to exploit them in these situations. Large financial institutions have may have information that is not available to the other players in the market virtually due to their market capitalization and they may end using this information to their advantage. (Mathieson et al 95-111)

The fact that a certain customer subset may decide to deal with the dominant provider, which is due to economies of scale, does not necessarily mean that the smaller service providers are less efficient than the large ones or that the large financial institutions are more efficient in capital allocation. If the large were large because of their efficiency then this should also be reflected on the accuracy of their measured returns. (Stewart 77)

It is therefore evident that the large financial providers exploit the asymmetrical provision of their information. This leads to mispricing of services whereby customers end up paying more for a service than the market value due to the customers’ loyalty to the institutions. Due to this exploitation of customers by the large financial institutions, I suggest that they should be dismantled to give smaller enterprises that will have a fair playing ground. The customer is bound to benefit from such an arrangement for he will be getting the right information always.

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