Overview

lemon


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An unsatisfactory product, where quality cannot reliably be checked before purchase. Even if some goods of the same type are perfectly satisfactory, their market price is lowered by the risk that the purchaser may get a lemon. If customers are risk-averse, the price will also be lowered by a risk premium. The market for second-hand cars is a typical example of the market for lemons at work.

Subjects: Economics.


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