Lemons & Loons

Tim Perri

No 13-09, Working Papers from Department of Economics, Appalachian State University

Abstract: Akerlof (2012, 2013) has argued individuals often do not behave according to rational expectations. He shows how buyers in a complete lemon’s market are worse off if they behave irrationally---like loons. We examine several different lemon’s market situations (including when workers may signal or be screened to reveal their quality) to determine the effects on welfare for loons and for society as a whole. Sometimes there are opposite effects for welfare for society and loons. Also, in some cases, both society and loons are better off due to loony behavior. Key Words: Lemons, asymmetric information, and signaling

JEL-codes: D82 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cta and nep-mic
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http://econ.appstate.edu/RePEc/pdf/wp1309.pdf (application/pdf)

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Journal Article: Lemons & Loons (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:apl:wpaper:13-09

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