Which of the following can be a solution to the lemons problem?
A)Providing testimonials from previous buyers.
B)Providing accessories to be used in the car.
C)Providing discount on the purchase of a car.
D)Providing a warranty that covers the costs of certain repairs.

Question

Quizplus · Accepted Answer

Providing a warranty that covers the costs of certain repairs can be a solution to the lemons problem as it assures the buyer that in case of any faults or defects, the costs of repair will be covered, thereby reducing the information asymmetry between the buyer and seller. Options A, B and C might not be effective in addressing the lemons problem as they do not directly address concerns regarding the quality and reliability of the product.

Which of the Following Can Be a Solution to the Lemons