Final answer:
A seller can be held liable for not disclosing material facts about a property. To reassure buyers with imperfect information, sellers can offer detailed documentation and warranties. Imperfect information can hinder buyers and sellers from agreeing on a price and discouraging market participation.
Step-by-step explanation:
A seller may be held liable for damages if he/she fails to disclose material facts about the property or if there is a lack of full disclosure. Transparency and honesty in disclosing relevant information about a product are critical in ensuring trust and legality in a transaction. A seller can reassure a possible buyer who is faced with imperfect information by providing thorough documentation of the product's condition, history, and quality, offering warranties or guarantees, and being open to questions and inspections.
The presence of imperfect information can make it difficult for buyers and sellers to agree on a price since the buyer may not be willing to pay a premium for perceived higher quality without sufficient evidence. This situation can discourage market participation as buyers are unsure of the product's quality and sellers find it challenging to demonstrate the true value of their goods without buyers suspecting they are overpaying.