Of Lemons and Employees

......and of course why you can never get a decent used car, [ Tim Harford, the undercover economist. ]

My Colleague doesn't think any of our colleagues who I think are lemons are lemons. I don't know what he thinks about me. I don't know what my boss thinks either. A little inside information would be so handy!!

The used car theory is very interesting, and very scarily true though.

There would be no price that a rational seller would offer that was low enough to make the sale. The deeper the discount, the more the buyer would be sure that the car was a terrible lemon.

More plausibly, only the market for cheap, shoddy used cars would survive. A person with a good car would hold onto it because he couldn't prove it was good and so wouldn't expect an attractive offer for it. And if the good cars aren't put up for sale, the lemons will be what is left.

How then have the used car market survived?

Well, the buyer might not be the happiest customer and the seller still thinks he could have got more on the car... But then used cars will always be cheaper than new car ;-) for the buyers and people will always want to upgrade to a better car (for the seller). And used car salesman will always lie.