Adverse Selection (Lemons Market)

Asymmetric Information: Introduction to Microeconomics

0.50
Fraction Good (f)
0.50
Avg. Buyer Value
$6,500
Market Outcome
—
Price
—

Drag the slider to change the fraction of good cars in the market. When buyers cannot distinguish good cars from lemons, the market price reflects average quality. If the average value falls below what good-car sellers require, they withdraw and only lemons remain.