The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:
A) the lemon problem.
B) moral hazard.
C) the winner's curse.
D) external costs.

Question

Quizplus · Accepted Answer

The lemon problem refers to the issue where buyers offer lower prices for products of uncertain quality due to the risk of purchasing a "lemon," or a product of lower quality than expected. This concept is related to information asymmetry in markets.

The Practice of Potential Buyers Offering Lower Prices for a Product