Lemon

History

The term lemon was initially used by George Akerlof in a paper that introduced the notion of adverse selection by using used-car markets. Akerlof used the word lemon to describe used cars of low quality that could not be differentiated by buyers from cars of higher quality upon casual inspection.

Definition

A lemon is a poor quality good being offered by certain sellers in the market that cannot be differentiated from similar high-quality goods.

References

Journal references

• The market for "lemons": quality uncertainty and the market mechanism by George Akerlof, Quarterly Journal of Economics, Volume 84,Number 3, Page 488 - 500(Year 1970): This paper discusses the problem of adverse selection, with used-car markets as the primary working example. It discusses adverse selection in experience goods as well as adverse selection in wages. The article does not explicitly use the term "adverse selection" more than once.^{JSTOR linkMore info}

Textbook references

• The Undercover Economist by Tim Harford, 10-digit ISBN 0345494016, 13-digit ISBN 978-0345494016 (paperback)^{More info}, Page 112-115, Chapter 5 (The Inside Story)