Experimental Studies of Markets with Buyers Ignorant of Quality Before Purchase: When Do "Lemons" Drive Out High Quality Products?

Authors:
Michael Lynch

Experiments indicated that if sellers could not develop reputations for poor quality, then the market would consist entirely of poor quality products. The need to attract re-purchase is not sufficient incentive to have the seller build a reputation for supplying good quality, while the imposition of a requirement for truthful advertising or labelling is sufficient.