Can Leasing and CPO Reduce Adverse Selection in the Used Car Market?

摘要

In his seminal paper on the lemons hypothesis, Akerlof [1970, QJE] suggested two possible outcomes resulting from the asymmetric information between the buyer and seller of a used car. First, "the bad cars tend to drive out the good," as they sell at lower prices (Akerlof, 1970, p 489). Second, private institutions can emerge to provide information to buyers about the quality of a product.rnEarlier empirical studies on the lemons hypothesis are inconclusive as some of them have found little evidence of adverse selection. In the used car market context, adverse selection arises when some sellers having less-than-average quality of cars are willing to sell their cars at any given price.