Lemon Market

When uneven quality of goods and Information Gap cause poor-quality goods to be priced relatively high in the market, or cause good-quality goods to become less exposed to the market, such a market is called a lemon market. The opposite concept is the peach market, a market where buyers also know the goods well, so high-quality products are traded.

When the seller knows a product well but the buyer has a hard time knowing it, the seller, who knows the quality, tries to get full price for good products, while the buyer, who does not know the quality, tries to buy at the average price and is unwilling to pay a high price. As this goes on, the good products do not sell and only the low-quality ones do.

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Topics: Economics,Gresham's Law
Category: Wiki/Economy