Summary
Introduction
Significant factors discussed in the paper relate to quality and uncertainty in the labor markets. Buyers in different market will use different mechanisms to judge the quality of products. For instance, in markets where buyers judge the quality by using some market statistics, sellers can usually use this as an opportunity to market low quality merchandise. This process may eventually lead to an increase in low quality products in the market. Such scenarios may promote interventions from government agencies in order to safeguard the interest of the buyer and ensure competitiveness among sellers by ensuring quality products are offered in the market.
Insurance
The case of quality in automobile can be applied in insurance. As the cost of insurance increases, the number of people insuring themselves will be those certain that they will need insurance. Similar scenario in the automobile situation where when the price falls, the numbers of used cars also falls. The buyer will incur a higher cost when the need to have insurance is high.
Employment of Minorities
Race can be used to ascertain a person’s background hence limit or enhance a person’s chances of employment. Certain jobs demand a certain level of quality hence a person race may be used to a certain his level of school and social background.
The cost of Dishonesty
The lemons a model can be applied to assess the level of dishonesty in the market. The higher the level of low quality products in the market causes a reduction in the market, which results to the market of the quality products being affect. Thus, honest sellers are affected in the process.
Reference
Akerlof, G. A. (1970). THE MARKET FOR "LEMONS": QUALITY UNCERTAINTY AND THE MARKET MECHANISM. Quarterly Journal of Economics, 84(3), 488-500.
