In 1970 george akerlof penned one of the most famous papers in economics. "The market for lemons" shows how, in markets where sellers know more than buyers, trade can dry up. His example is not fruit but used cars—a "lemon" is one with hidden defects. Buyers want reliable wheels, or "peaches". Not knowing which they are buying, they shave their offers. That puts off peach-sellers, some of whom exit the market, raising the chance of buyers getting a lemon, pushing prices down still further. It becomes impossible to sell a peach for what it should be worth.
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