The market for lemons
Akerlof1970 The Market for Lemons: Quality,Uncertainty and the Market Mechanism
Akerlofinvestigates the effect of asymmetricinformation on the market equilibrium, based on theexample of the used cars market.
Used cars can either be of a good quality (Plum), or they can be faulty (Lemon).
The seller knows the level of quality of his own car
Potential buyers do not know the level of quality andcannot observe it