Final answer:
To ensure performance under a contract, especially where imperfect information is a concern, parties rely on guarantees, warranties, and service contracts for explicit reassurance, as well as reputation and unwritten policies for implicit reassurance.
Step-by-step explanation:
When engaging in a transaction, particularly in instances of imperfect information, parties often seek various forms of reassurance to ensure that the agreement will be upheld. There are different mechanisms used across various markets to reduce the risks associated with imperfect information. In the goods market, sellers use guarantees, warranties, and service contracts to affirm the quality of the products they are selling. If a seller is offering goods such as used cars or emeralds where the risk of imperfect information is significant, these explicit reassurances can build trust with potential buyers. In contrast, even subtle forms of reassurance, such as the reputation of a seller or unwritten policies like a restaurant accepting the return of a dish, also play a crucial role in ensuring customers that a service or good will meet their expectations.