A possible market solution that a reputable firm can engage in when faced with the lemons problem is

Question

Quizplus · Accepted Answer

Offering a warranty can be a possible market solution to the lemons problem as it signals to potential buyers that the firm is willing to stand behind the quality of their product. This can help to overcome any concerns about potential hidden defects and provide assurance to consumers that they are making a worthwhile purchase. Additionally, warranties can impose costs on the seller if the product does not meet expectations, which can incentivize them to ensure higher quality production in the first place.

A Possible Market Solution That a Reputable Firm Can Engage