Sucking on a Sour Lemon
Posted in Economics Problems, Institutions on Mar 2nd, 2010
George Akerlof’s canonical example of the market for lemons (information asymmetries leading to unraveling in free markets with subsequent welfare losses) seems to be a perfect illustration of the problem of asymmetric information. Ironically, just as what has happened in the canonical descriptions of public goods problems (lighthouses and honey bees), market power (oil cartels), […]
