Economics & Decision · 1970
The Market for 'Lemons': Quality Uncertainty and the Market Mechanism
George A. Akerlof
Overview
Akerlof showed how unequal information can wreck a market. Using the used-car market — where sellers know which cars are 'lemons' and buyers don't — he demonstrated that information asymmetry can drive good products out and even collapse trade entirely.
Founded the economics of information; won the 2001 Nobel Memorial Prize.
Key findings
Methods
A simple, elegant economic model of a market with asymmetric information between buyers and sellers, analysing the equilibrium that results when quality is hidden.
Keywords
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