Economics

On the market for "Lemons": quality provision in markets with asymmetric information

K. Giannakas and M. Fulton

Discover the intriguing dynamics of product quality in markets influenced by asymmetric information! Conducted by Konstantinos Giannakas and Murray Fulton, this research unveils the conditions that allow low- and high-quality products to coexist, challenging the common belief that low-quality always prevails. Dive into the insights derived from a simple yet powerful model.... show more

Abstract

Akerlof's "Lemons" paper provides a seminal economic result suggesting that, in markets with asymmetric information where product quality is unobservable by consumers prior to purchase and use, the introduction of a low-quality product will drive its higher quality counterpart(s) out of the market. In this paper we identify some empirically relevant cases/conditions under which the introduction of a low-quality product does not drive its higher quality substitutes out of the market but, instead, ends-up coexisting with them.

Publisher

Humanities & Social Sciences Communications

Published On

Dec 14, 2020

Authors

Konstantinos Giannakas, Murray Fulton

DOI

https://doi.org/10.1057/s41599-020-00658-w

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