Quality Uncertainty and the Market for Lemons
3 years ago
Microeconomics
Asymmetric information – Situation in which a buyer and a seller possess different information about a transaction.
The lemons problem: With asymmetric information, low-quality goods can drive high-quality goods out of the market.
Adverse selection – Form of market failure resulting when products of different qualities are sold at a single price because of asymmetric information, so that too much of the low-quality product and too little of the high-quality product are sold.
Bijay Satyal
Dec 1, 2021