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Topic: The Market for Lemons

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Adverse selection

Information asymmetry

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	The Market for Lemons - Wikipedia, the free encyclopedia
		Examples include the market for used cars, the dearth of formal credit markets in developing countries and the unavailability of health insurance for the elderly (that is, in the absence of government programs such as Medicare (United States)).
		The result is that a market in which there is asymmetrical information with respect to quality shows characteristics similar to those described by Gresham's Law: the bad drives out the good.
		The term "lemon," did not enter the language of economics as a result of this paper.
	en.wikipedia.org /wiki/The_Market_for_Lemons (852 words)

	Adverse selection - Wikipedia, the free encyclopedia
		On the most abstract level, it refers to a market process in which bad results occur due to information asymmetries between buyers and sellers: the "bad" products or customers are more likely to be selected.
		In this case, there may not be an actual asymmetry of information, the insurance company may know who is or isn't a smoker, but, the insurer not being allowed to act on that information, there is a "virtual" asymmetry of information.
		Note that because of the existence of information asymmetry, this is not a market with perfect competition.
	en.wikipedia.org /wiki/Adverse_selection (673 words)

	Production Practices and costs - Fresh Market Organic Lemons (Site not responding. Last check: 2007-10-20)
		Yields for organically produced lemons are similar to those of a conventionally produced crop, ranging from 500 to 900 field boxes per acre and averaging 675 field boxes per acre.
		For lemons in the South Coast, growers either monitor their own orchards or work with a cooperative insectary that supplies biological control agents (e.g., beneficial insects and snails) and other information and assistance relevant to pest management.
		The portion of the crop that is not sold as fresh market fruit is sold for juice on the organic or conventional market.
	www.sarep.ucdavis.edu /pubs/costs/97/lemon (8662 words)

	The Market for Lemons -- Facts, Info, and Encyclopedia article (Site not responding. Last check: 2007-10-20)
		"The Market for Lemons: Quality Uncertainty and the Market Mechanism" is a paper by (Click link for more info and facts about George Akerlof) George Akerlof written in 1970 that established the fundamentals of asymmetrical information theory.
		Yet because buyers don't know which cars are the lemons — under asymmetric information —, in an effect that is known as (Click link for more info and facts about crowding out) crowding out, the market price of even the good cars decreases.
		The term " (A small evergreen tree that originated in Asia but is widely cultivated for its fruit) lemon," meaning a defective (typically used) car, did not enter the language of economics as a result of this paper.
	www.absoluteastronomy.com /encyclopedia/t/th/the_market_for_lemons.htm (593 words)

	[No title]
		This is known as a market for lemons and is evidenced in the used car market.
		Because of the inherent necessity for efficient capital markets and their usefulness in the economic and corporate development, the market for lemons cannot be permitted to exist in the capital markets.
		Market integrity and the performance of systemic checks The development of regulations The enforcement of regulations Systemic checks and market integrity The markets systems have moved in the right direction and at a speed which would make developed markets envious.
	www.geocities.com /sandeepparekh/Rip_Van_Winkle.doc (2897 words)

	Writing the "The Market for ‘Lemons’": A Personal Interpretive Essay (Site not responding. Last check: 2007-10-20)
		I wrote “The Market for ‘Lemons,’” (a 13-page paper for which I was awarded the Prize in Economics) during my first year as assistant professor at Berkeley, in 1966-67.
		Since the “Market for ‘Lemons’” was an early paper in this new style of economics, its origins and history are a saga in that change.
		But I did see that I could give interesting examples in which the market for used cars was diminished, possibly even to the point of collapse, by the presence of asymmetric information.
	nobelprize.org /economics/articles/akerlof (2616 words)

	Economics Interactive
		This theory suggests that firms with market power may use hikes in wages or other resource costs as excuses to raise output prices when they would otherwise be reluctant to boost prices because of concerns about adverse publicity, antitrust actions, or possible new government regulations.
		Arbitration is a process for resolving disputes by accepting as final the judgment of impartial individuals, and reduces the likelihood of costly and prolonged litigation.
		Auctions tend to be more common when the market is not wide and transactions in the specific good or the service to be performed are relatively infrequent.
	www.unc.edu /depts/econ/byrns_web/Economicae/EconomicaeA.htm (4029 words)

	Lemons and the Nobel Prize - Mises Institute (Site not responding. Last check: 2007-10-20)
		As a first-year graduate student in economics, I was assigned George Akerlof's famous paper, "The Market for Lemons," which appeared in The Quarterly Journal of Economics in 1970, and was then regarded as a classic work.
		The theme of the "imperfect information" economists is as such: market participants often do not enjoy the "perfect information" that is necessary to make markets function in the proper fashion, as indicated by the point of equilibrium demonstrated in the famous Marshallian Cross where supply and demand are equal.
		Furthermore, potential markets are plagued with asymmetric information, in which the necessary information for the buyers and sellers to reach "equilibrium" is not evenly distributed between the different parties.
	www.mises.org /fullstory.aspx?control=801&id=75 (1071 words)

	Turn Stock Market Lemons Into Tax-Saving Lemonade (Site not responding. Last check: 2007-10-20)
		ince early 2000, the major stock market averages have been heading in the wrong directionâ”down.
		However, a weak stock market may be useful for retirement plans, too.
		Then, if the market rebounds and your Roth IRA grows to $300,000, $400,000, or more, all of that growth can be tax free.
	bottomlinesecrets.com /blpnet/article.html?article_id=27510 (1291 words)

	FDIC Banking Review - Article I - Vol. 8 No. 3
		The success of the single-family market in the 1980s spread to other loan markets in the 1990s, as trading increased dramatically for all types of loans ranging from commercial mortgages to nonperforming consumer loans.
		However, a classic principle of economics, known as the "lemons principle," suggests an alternative view, that the value of granting RandWs should be greater than their cost.
		The lemons principle is a response by Akerloff (1970) to the observation that the value of a new automobile declines significantly as soon as it is driven off the showroom floor.
	www.fdic.gov /bank/analytical/banking/1995summ/art1full.html (5934 words)

	10.17.2001 - The market for lemons
		His 1970 study, “The Market for Lemons” “brought him to fame in the economics communit,” Aaron said.
		Spence identified “market signaling,” which refers to actions that individual market participants may take to increase their chances of an advantageous outcome.
		Stiglitz explored the opposite type of market adjustment, in which less-informed parties elicit information from better-informed parties by offering them a menu of options; the choices made are revealing.
	www.berkeley.edu /news/berkeleyan/2001/10/17_asyme.html (845 words)

	Emergent Chaos: Security Signaling (Site not responding. Last check: 2007-10-20)
		Signaling is a term from the study of lemons markets.
		A lemons market is a market, such as in used cars, where one party (the seller) knows more than the buyer.
		The buyer won't pay a peach price for a lemon car, as such, the price for used cars is lowered to that of the price of a lemon.
	www.emergentchaos.com /archives/000493.html (803 words)

	Market Failure or Success: The New Debate
		Market failure at the microeconomic level, the theory suggests, may even create or aggravate disturbances throughout the economy.
		Market Failure or Success is required reading for all who seek to better understand one of the most exciting debates in economics today.
		The economics of asymmetric information—the possibility that markets may fail when a seller knows more about the quality of a car or a stock, when a patient knows more about his health than an insurer, when a worker knows more about his abilities than an employer—has fascinated economic theorists for a generation.
	www.independent.org /tii/catalog/cat_market_failure.html (844 words)

	Conglomerate Blog: The Market for Lemons
		Tomorrow I am teaching Akerlof's article on asymmetric information, and in preparation I stumbled across this essay: Writing the "The Market for ‘Lemons’": A Personal Interpretive Essay.
		The funny thing about the Akerlof story is that I think it illustrates his point: there is a market failure created by bad papers (on "trivial" topics) driving out the good.
		Heuristics based on credentialism is a simpler way to get the same wrong outcome; an author's status (an unpublished asst professor or a no-name patent clerk) affects the judgment of editors and their willingness to give the paper a fair assesment.
	www.theconglomerate.org /2005/09/the_market_for_.html (691 words)

	USATODAY.com - Three Americans win Nobel Prize in economics (Site not responding. Last check: 2007-10-20)
		When George Akerlof wrote a paper called "The Market for Lemons" his first year as an assistant professor 32 years ago, he couldn't get economics journals to publish it.
		It was considered quirky and went against the grain of conventional economic thinking, which held that buyers and sellers would not agree on a sales price unless they both considered themselves better off.
		Trouble is, the theory of efficient markets assumes that buyers and sellers are equally informed.
	www.usatoday.com /money/economy/2001-10-10-nobel.htm (663 words)

	PIMCO Bonds - EMW May 2005 (Site not responding. Last check: 2007-10-20)
		U.S. autos triggered by a range of market concerns relating to earnings, legacy costs, uncertain negotiations with labor unions, and rumors about competing claims on the large cash held on the balance sheets.
		But GM/F were being disproportionately impacted as illustrated by the declining market share (in contrast also to the record profits announced by a Japanese competitor), and more micro issues relating to legacy costs, SUV-importance, etc….
		This shocked the market given its expectation of supply patterns, thereby reducing the relative attractiveness of other bonds; it also raised some concerns as to implicit signals about the prospects of a secular fiscal deterioration.
	pimco.com /LeftNav/Late+Breaking+Commentary/EMW/2005/EMW+May+2005.htm (2161 words)

	Welcome to FreshPlaza
		Tholen - The president of the grain futures market of Northwest Argentina discussed a proposal for the establishment of the worlds first futures market for lemons with the minister of production and the secretary of regional integration.
		The institute is to get a regional character and will operate besides the existent futures market for grains and oilseeds.
		The initiative can count with the wide experience of the existent futures markets in Argentina.
	www.freshplaza.com /2005/12aug/1_ar_futuresmarket.htm (98 words)

	Emergent Chaos: Liability for bugs is part of the solution (Site not responding. Last check: 2007-10-20)
		The reason good programs (which means those with fewer bugs) do not drive poor programs from the market lies in the information asymmetry characterizing the software market.
		As discussed by Ross Anderson [PDF], the market for software is a "market for lemons": sellers know more about the quality of their product than do buyers, leading buyers to assume the worst, lest they (in their optimism) be taken to the cleaners.
		I know that software is likely to remain a market for lemons, but Oracle's recen...
	www.emergentchaos.com /archives/001839.html (581 words)

	TCS: Tech Central Station - Drug Testing and the Market for Lemons (Site not responding. Last check: 2007-10-20)
		Begin with the proposition that a market failure is an essential precondition for government intervention.
		Congressman Henry Waxman claims that: "There is an absolute correlation between the culture of steroids in the major league clubhouse and the culture of steroids in high school gyms.
		Instead, at least as I see it, the only plausible market failure story in this context is based on Nobel economics laureate George Akerloff's famous "market for lemons." Akerloff focused on the impact asymmetric information as between buyers and sellers has on the market for used cars.
	www.techcentralstation.com /060605D.html (1062 words)

	ipedia.com: George Akerlof Article (Site not responding. Last check: 2007-10-20)
		In " The Market for Lemons : Qua...
		In "The Market for Lemons: Quality Uncertainty and the Market Mechanism", published in Quarterly Journal of Economics in 1970 he coined the term "Lemon" for a used car with hidden defects.
		Akerlof received his Bachelor's degree from Yale University in 1962, and his PhD from MIT in 1966.
	www.ipedia.com /george_akerlof.html (206 words)

	Financial Cryptography: Security Signalling - the market for Lemmings
		It's a good question, as we know that the market for security is highly inefficient, some would say dysfunctional.
		It's a bit like the market for lemons, which was thought to be just anomalous and weird until some bright economist sat down and studied it.
		And their ability to arrange testing by real threats is limited by the inefficient market for flhats (another topic in itself, but one beyond today's scope).
	www.financialcryptography.com /mt/archives/000290.html (1936 words)

	The Unofficial Paul Krugman Web Page
		All three men focused on the complications a market economy faces when information is "asymmetric" — that is, when sellers know something buyers do not, or vice versa.
		Akerlof started the field with his classic paper "The Market for Lemons." He pointed out that sellers of used cars — and many other items — are often better informed than potential buyers about the quality of those items.
		But people are likely to know more than the insurance companies that cover them about their future drug costs; this puts retirees seeking drug insurance in the same position as people trying to sell used cars.
	www.pkarchive.org /column/101401.html (743 words)

	Wikipedia: Replies to common objections - Open Encyclopedia (Site not responding. Last check: 2007-10-20)
		Won't those with a product or service to hawk see the opportunity to hit a targeted market and write new articles for their product or worse, edit the article that corresponds to their generic product class (e.g.
		Many of the great advances in the social and natural sciences have come by challenging the status quo and, for that, their contributions were ignored or debased by their peers.
		For example, George Akerloff, Nobel Laureate in Economics in 2001 had his classic paper (for which he won the Nobel Prize) entitled "The Market for Lemons: Quality Uncertainty and the Market Mechanism" rejected by the American Economic Review for being trivial and by the Journal of Political Economy because it conflicted with economic theory.
	open-encyclopedia.com /Replies_to_common_objections_oew (6287 words)

	Cars Lemons
		You to participate in cars lemons program lexus lexus vehicles purchased or leased prior to may 17, 2004, do not require Purchases you will make buying a cars lemons car is one of the most important and expensive cars lemons Vehicles under cars lemons all 10,000 lbs Ltd cars lemons by krohn moss, Warranty repair
		The paper describes the second-hand market for cars as an example of the more general problem of are good used cars, and defective used cars ("lemons").
		They're called "laundered lemons" and attorney Craig Kimmel says his clients are victims of dealers who don't quite a few laundered lemons and salvaged cars at dealerships right now
	www.lemon-law-guide.com /lemon-law/cars-lemons.html (834 words)

	Cycles and Multiple Equilibria in the Market for Durable Lemons (SMEALSearch) - Pal,Rangaswamy,Giles,Debnath (Site not responding. Last check: 2007-10-20)
		We investigate the nature of market failure in a dynamic version of Akerlof (1970) where identical cohorts of a durable good enter the market over time.
		Typically, in equilibria of the dynamic model, sellers with higher quality wait in order to sell and wait more than sellers of lower quality.
		Among other things, we show for any distribution of quality that there exist an infinite number of cyclical equilibria where all goods are traded within a certain number of periods after entering the market.
	smealsearch2.psu.edu /6890.html (256 words)

	The Market for 'Lemons': Quality Uncertainty and the Market Mechanism
		"Markets and Multiunit Firms from an American Historical Perspective," NBER Working Papers 8232, National Bureau of Economic Research, Inc.
		"Competition and Efficiency in Markets with Quality Uncertainty," Economics Discussion Papers 593, University of Essex, Department of Economics.
		"Competition and Market Dynamics on the Russian Deposits Market," Research Paper ERS; ERS-2000-25-STR, Erasmus Research Institute of Management (ERIM), RSM Erasmus University, revised 27 Oct 2005.
	ideas.repec.org /a/tpr/qjecon/v84y1970i3p488-500.html (3668 words)

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