Lemon

From Market

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

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)