Quality Differentials and Prices: Are Cherries Lemons?
AbstractIn G. A. Akerlof's market for lemons, goods of differential qualities sell under the same standard. If no price differentials exist, then the low quality goods drive out the high quality goods. In cherry markets, heterogeneous lots of cherries sell within the same market standard. At the time of sale, buyers know only the market standard. Since different qualities sell under the same standard, the potential for lemons exists if buyers cannot identify different qualities. The authors' theoretical and empirical models suggest seller characteristics signal quality to buyers, and buyers pay premiums to firms with these characteristics. Thus, cherries are not lemons. Copyright 1991 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 39 (1991)
Issue (Month): 6 (December)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
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- Engers, Maxim & Hartmann, Monica & Stern, Steven, 2009. "Are lemons really hot potatoes?," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 250-263, March.
- Kirsten Foss, 1996. "A Transaction cost Perspective on the Influence of Standards on Product Development Examples from the Fruit and Vegetable Market," DRUID Working Papers 96-9, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- Raboy, David G. & Basher, Syed Abul & Hossain, Ishrat & Kaitibie, Simeon, 2012. "More efficient production subsidies for emerging agriculture in micro Arab states: a conceptual model," MPRA Paper 38854, University Library of Munich, Germany.
- Bart Wilson & Arthur Zillante, 2010. "More Information, More Ripoffs: Experiments with Public and Private Information in Markets with Asymmetric Information," Review of Industrial Organization, Springer, vol. 36(1), pages 1-16, February.
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