Talk:The Market for Lemons

July 2007

I'm not convinced many of these products still end up in the marketplace (e.g. LCD monitors with dead pixels) is valid. See http://en.wikipedia.org/wiki/Dead_pixel dead pixels may actually be within specification.

Criticism? As a lay observer, this can be trivially shown to be incorrect - markets for used cars exist, even in the absence of lemon laws, so some of the assumptions must not match the real world. A section discussing this would be helpful....

The first paragraph indicates that information asymmetry is where "the seller knows more about a product than the buyer". My understanding is that information asymmetry can be either way(?) for example in management buy-outs. 86.154.64.225 23:10, 22 July 2007 (UTC)[reply]

"Within specification" does not mean that I, the consumer, know how many dead pixels there are going to be in a new LCD monitor that's in a box or is mail ordered. But I'd agree that this is a particularly poor example, it's one of the few things a consumer who's buying a used computer face to face can determine for themselves (maybe not an absolute count, but a sufficient "this one is good enough for me" determination).

But things like "how much life do it's disk drive/fans/capacitors have" is not something anyone can really determine (except in that most consumer systems have a design life of three years, but you have no idea how abused (heat, shock/vibration) a computer you're buying was, and while you can use a S.M.A.R.T monitoring program to figure out how long the disk drive has been powered up, that's way beyond most "techies", let along consumers).

I can't yet make it "encyclopedic", but after a suggestion on Slashdot, it's blindingly obvious that the market for computer programmers is a "Market for Lemons". This theory (as explained in this article) covers pretty much everything that I and many others have been thinking about for years---and it's no surprise economists have a theory to fit it.... Hga 12:26, 7 August 2007 (UTC)[reply]

The example given of restaurants is more of a rebuttal to this argument, as a quick perusal of the increasing ratio of fast food crap over good, independent restaurants (not "fine dining", just good) will show. Many societal pressures at work as well, of course. I can't think of an example that does support this theory. Dubious indeed!

no market in used computers??

with the net effect of a non-existent or low-quality used computer market

Eh, a quick look at eBay as well as my experience bying second-hand computer every year clearly show that there exists a good market. Who invented the claim?? That would make an interesting positive example; I think the reasons are that many computers indeed come with 30-day warranty and enough buyers are computer specialists to ensure that consumers can't be all fooled. 125.234.4.52 04:05, 22 August 2007 (UTC)[reply]

Seller has incomplete information

There's an article here which makes a number of critiques of this article as of roughly this revision. One of the points which hasn't been addressed is the treatment of the situation in which the seller has less information than the buyer (the reverse of the classic "lemon" situation). The examples of the dearth of formal credit markets in developing countries and the unavailability of health insurance for the elderly would appear to be in this category. According to [1], both of these examples are from Akerlof's paper. I tried rewriting these sections, but I'm not sure I would get it right. Perhaps someone who knows this area of economics better, and/or has more time to read the papers involved, could tackle it. Kingdon (talk) 05:59, 4 February 2008 (UTC)[reply]

In the case of adverse selection, the result is that since everybody who wants insurance is probably sick, the benefit of risk-hedging goes to zero and therefore no one would rationally choose to buy insurance, as they would have to pay more than they would pay out of pocket since the insurance companies needs to make a profit to exist. But although this would result in the disappearance of an insurance market, what the article mentions is information assymetry about the good, not about the customer. I think this is a bit more complex for insurance as what "the good" is is perhaps a bit less concrete. An insurance plan is more like a corporate stock than a used car. —Preceding unsigned comment added by 72.68.93.140 (talk) 07:24, 12 March 2009 (UTC)[reply]

In the situation where the seller has less information about a product than a buyer, there is only a small chance the seller will be asking a fair price, since the seller is bound to either over- or underestimate the fair price of the good. Since buyers have more information about the product, they will be better than the sellers at comparing estimated quality with price. Therefore the sellers which are overestimating the quality of their good -at least as long as they remain above the fair price- will not be able to make a deal. This, then, will result in there only being a market for goods priced lower than, or in accordance with the fair price.

If buyers bid against each other until the fair price is reached, a functioning market exists. Is there some uncentive for the buyers to not bid against eachother? Or might relatively high supply cause this? Might this result in sellers adjusting for a buyer's incentive to underprice? Then the seller might only sell if the buyer is prepared to pay above average, and the buyer -smart as he is- will not buy: the market could collapse. IKiddo (talk) 13:41, 21 August 2009 (UTC)[reply]

Topic creep

Based on the lead section, this article should be just about Akerlof's paper. Yet it creeps into other related areas with little warning to reader when it's actually doing so. VasileGaburici (talk) 17:29, 16 September 2008 (UTC)[reply]

As of now there are three almost-identical paragraphs giving the same example of used cars/lemons. Can we clean this up some? 12.146.21.163 (talk) 20:59, 7 October 2009 (UTC)[reply]

As Is purchases

The page on Lemon Law states that buying 'as is' cars does NOT waive your lemon law rights, in direct contradiction to this article. Could someone familiar with the laws clarify this point? Quantum7 (talk) 06:50, 13 October 2008 (UTC)[reply]

That's a good question for Wikipedia:WikiProject_Law. VG ☎ 06:57, 13 October 2008 (UTC)[reply]

Somebody notice this, do something about it, and feel free to delete this comment when you are done.

The entry for 'lemon law' states, "If you knowingly purchase a car in "as is" condition the buyer does not void their rights under applicable lemon laws." in the section labeled 'as is'.
The entry for 'the market for lemons' states, "Purchasers who knowingly purchase a car in "as is" condition accept the defects and void their rights under the "lemon law"" at the end of the section labeled 'laws in the u.s.'

these clearly do not jibe.

i posted this on the 'lemon law' talk page unaware that it was mentioned on this page. in any case, somebody who knows what they are doing ought to do something about this.Carnydog (talk) 02:14, 29 December 2008 (UTC)[reply]

good article

This is actually a pretty good and well written article. A few more sources and citations and a bit of clean up could get this to WP:Good article standards easily.radek (talk) 05:29, 15 May 2010 (UTC)[reply]

No mention of veracity?

This idea that there are no good used cars for sale is obviously false, so why is it given so much weight in the article? Why no explanation of why it's an oversimplification? —Preceding unsigned comment added by 71.167.59.166 (talk) 06:46, 14 January 2011 (UTC)[reply]

"This idea that there are no good used cars for sale is obviously false, so why is it given so much weight in the article?" Because that is not what the article says, which you would know had you read the article. Vilhelmo (talk) 01:57, 6 June 2013 (UTC)[reply]

A "lemon" is not a "clunker"

A "Lemon (automobile)" is not the same thing as a "Clunker (automobile)" A clunker is a beat-up old car that still runs, and might even run well. It just makes clunking noises as it moves along. A lemon never works right, even if it is brand new and looks wonderful. A lemon is one those things that never quite works no matter how much work you try to do to fix it. A clunker works, maybe even works very well, but just looks and sounds terrible. Indeed, a lemon is probably the mirror opposite of a clunker. --Bruce Hall (talk) 02:29, 8 September 2011 (UTC)[reply]

Why is this article full of pictures of cars

And what do the actual pictures of cars have to do with the economics concept? — Preceding unsigned comment added by 2001:388:608C:4950:15CA:378A:E7B1:C7A4 (talk) 00:07, 16 July 2013 (UTC)[reply]

The article (case study) took the example of second hand cars. 81.57.178.197 (talk) 22:55, 8 January 2014 (UTC)[reply]

Transparency

The basic concept of this seems to be the need of transparent information. We may need to link to concepts of transparency (market) and open data. 81.57.178.197 (talk) 22:55, 8 January 2014 (UTC)[reply]

Inconsistent terminology for "good" products

Early in the article, good cars (by contrast with "lemons") are called "peaches", later on they're called "cherries". One term should be used throughout. Glenbarnett (talk) 10:40, 3 March 2016 (UTC)[reply]

Done. Replaced by "peach" everywhere, which should reflect the most popular usage. 7804j (talk) 21:22, 10 October 2016 (UTC)[reply]

Dr. Quiggin's comment on this article

Dr. Quiggin has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:

The Criticism section could be improved. The first para is an OR defence against unnamed critics, while the second refers to a non-notable fringe critic.

We hope Wikipedians on this talk page can take advantage of these comments and improve the quality of the article accordingly.

Dr. Quiggin has published scholarly research which seems to be relevant to this Wikipedia article:

Reference : Schrobback, Peggy & Mallawaarachchi, Thilak & Quiggin, John C., 2011. "The complexities in environmental decision-making for the Murray-Darling Basin," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 100708, Australian Agricultural and Resource Economics Society.

ExpertIdeasBot (talk) 15:31, 31 May 2016 (UTC)[reply]

Question about the Akerlof’s model (market of used autos)

How Akerlof calculated his model, in particular, S1? How did he get it without data of costs for the 1st group of market agents? And where did he take average quality (p/2)? All in all, his conception is understandable, but only this moment he didn’t explain. — Preceding unsigned comment added by 83.220.236.136 (talk) 17:38, 2 January 2020 (UTC) Really? Nobody knows how he got it?! I am not surprised, because in wiki always are authors that write with low skills. In addition, there is the biggest mistake in “a more general...”[reply]

How could you compare price and utility ?! Instead of U(l) and U(p) you should write “p” and “l” (it is where “p_sym”). Right version is also in paper linked by wiki and in every course book of economics!