The Inuence of Informed Buyers in Markets Susceptible to the Lemons Problem

Philippe Mahenc

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Abstract: 1 er mars 2004 Résumé I show that the presence of informed buyers is necessary but not always sucient for producers to use prices as signals of product quality. A suciently high fraction of informed buyers eliminates the lemons problem. A small fraction of informed buyers mitigates the lemons problem, provided that buyers' prior belief of high quality is suciently pessimistic : price reveals high quality at a signaling cost which increases with market power. However, if buyers' prior belief of high quality is optimistic when the market is poorly informed, then the lemons problem is not overcome.

Keywords: Experience Good; Quality; Signaling; Bordeaux Wine (search for similar items in EconPapers)
Date: 2004
Note: View the original document on HAL open archive server: https://hal.science/hal-02083491v1
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Citations: View citations in EconPapers (10)

Published in American Journal of Agricultural Economics, 2004

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Related works:
Working Paper: Influence of Informed buyers in markets susceptible to the lemons problem (2018)
Journal Article: Influence of Informed Buyers in Markets Susceptible to the Lemons Problem (2004)
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