Critical Reception
George E. Hoffer and Michael D. Pratt state that the “economic literature is divided on whether a lemons market actually exists in used vehicles." The authors’ research supports the hypothesis that “known defects provisions,” used by US states (e.g., Wisconsin) to regulate used car sales have been ineffectual, because the quality of used vehicles sold in these states is not significantly better than the vehicles in neighboring states without such consumer protection legislation.
Both the American Economic Review and the Review of Economic Studies rejected the paper for "triviality," while the reviewers for Journal of Political Economy rejected it as incorrect, arguing that if this paper was correct, then no goods could be traded. Only on the 4th attempt did the paper get published in Quarterly Journal of Economics. Today, the paper is one of the most-cited papers in modern economic theory (more than 8,530 citations in academic papers as of May 2011), and has profoundly influenced economic thinking in virtually every field of economics, from industrial organisation and public finance to macroeconomics and contract theory.
Read more about this topic: The Market For Lemons
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