The Lemon Principle and Market Failure In The Nashville TN Used Cars Industry
Imagine if you are shopping for a used car, and suddenly, someone came up to you on the street and assert a bold claim, "The used Nashville TN Used Cars market has only low quality cars for sale!" Would you have agreed with this statement?Well, there are reasons to believe that this statement has got a ring of truth after all! According to the seminar paper titled The Market For Lemons: Quality Uncertainty and The Market Mechanism written in 1970 by George Akerlof, Professor for Economics at the University of California at Berkeley, the market failure in the used car industry and hence, the assertion that only 'bad' Used Cars in Nashville can exist in the used car industry, can actually be mathematically proven. This paper even won him the Nobel Prize in 2001! In this paper, George used the term Lemons to denote used cars of poor quality (Lemon is actually an American slang used to represent a bad car), and the term Peaches to denote used cards of good quality. S...