decision. Asymmetric information is the condition where one party, either the buyer or the seller, has more

information about the product's quality or price than the other party. In either case (imperfect or asymmetric

information) buyers or sellers need remedies to make more informed decisions.

“Lemons” and Other Examples of Imperfect Information

Consider Marvin, who is trying to decide whether to buy a used car. Let’s assume that Marvin is truly clueless

about what happens inside a car’s engine. He is willing to do some background research, like reading

Consumer Reportsor checking websites that offer information about used car makes and models and what

they should cost. He might pay a mechanic to inspect the car. Even after devoting some money and time

collecting information, however, Marvin still cannot be absolutely sure that he is buying a high-quality used

car. He knows that he might buy the car, drive it home, and use it for a few weeks before discovering that car is
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