The "Lemon's" argument helps to explain why

Question

Quizplus · Accepted Answer

The "Lemon's" argument, also known as the asymmetric information theory, states that the market for used cars is negatively affected by the presence of "lemons" (used cars with hidden defects). This creates a situation where buyers view all used cars as potentially defective, reducing their willingness to pay and driving down the price of used cars. Therefore, physical depreciation alone is an insufficient reason for the sharp price differential between new and used cars.

The "Lemon's" Argument Helps to Explain Why