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

Author

Listed:
  • Konstantinos Giannakas

    (University of Nebraska)

  • Murray Fulton

    (University of Saskatchewan)

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.

Suggested Citation

  • Konstantinos Giannakas & Murray Fulton, 2020. "On the market for “Lemons”: quality provision in markets with asymmetric information," Palgrave Communications, Palgrave Macmillan, vol. 7(1), pages 1-6, December.
    • Handle: RePEc:pal:palcom:v:7:y:2020:i:1:d:10.1057_s41599-020-00658-w
    DOI: 10.1057/s41599-020-00658-w
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    References listed on IDEAS

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    1. Jayson L. Lusk & Jutta Roosen & Andrea Bieberstein, 2014. "Consumer Acceptance of New Food Technologies: Causes and Roots of Controversies," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 381-405, October.
    2. Murray Fulton & Konstantinos Giannakas, 2004. "Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
    3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    4. Auster, Sarah & Gottardi, Piero, 2019. "Competing mechanisms in markets for lemons," Theoretical Economics, Econometric Society, vol. 14(3), July.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    7. Nicholas Kalaitzandonakes & Peter W.B. Phillips & Justus Wesseler & Stuart J. Smyth (ed.), 2016. "The Coexistence of Genetically Modified, Organic and Conventional Foods," Natural Resource Management and Policy, Springer, number 978-1-4939-3727-1, December.
    8. Konstantinos Giannakas & Amalia Yiannaka, 2008. "Market and Welfare Effects of Second-Generation, Consumer-Oriented GM Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 152-171.
    9. Zelin Zhang & Kissan Joseph & Ramanathan Subramaniam, 2015. "Probabilistic Selling in Quality-Differentiated Markets," Management Science, INFORMS, vol. 61(8), pages 1959-1977, August.
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    Cited by:

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