When a person buys a used car, it might turn out to be a lemon. If the car is a lemon, it is worth less to the buyer than if it has no defects. Does the used-car market have different prices reflecting different qualities—a low price for a lemon and a higher price for a car without defects? It turns out that it does. But the market needs some help in overcoming what is called the lemons problem —the problem that when it is not possible to distinguish reliable products from lemons, there are too many lemons—

perhaps only lemons—and too few reliable products—perhaps none.