Akerlof: Difference between revisions
'''George Akerlof''' (born 1940) is an American economist and Nobel laureate whose work on information asymmetry transformed how we understand why markets fail. His 1970 paper "The Market for 'Lemons'" showed that when sellers know more than buyers, markets can collapse as good products are driven out. |
== The Market for Lemons == Akerlof's insight begins with a simple observation: the seller of a used car knows more about the car than the buyer. The buyer knows this. The buyer therefore discounts the price to account for the risk of buying a "lemon" — a car with hidden defects. But the discount is an average applied to all cars, not fine-tuned to each car's actual quality. The result is a death spiral: good cars leave the market because their owners cannot get a fair price, leaving only le... |
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Revision as of 10:23, 10 June 2026
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