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Unformatted text preview: May. 25 th Theoretical part of the course 1) Discipline deduction 2) Need for organizationwhat do I theorize about? It is what you learn about why it works. Planning not plans. 3) Develop critique 4) Professional Jargon The Market for Lemons LemonsA car that sucks. Asymmetric information: the buyer cannot judge the vaule of the car, but the seller knows the value. The knowledge that is common is that 50^ are good and the rest are lemons. If a car is good, the car is worth 1. If he car does not work, It is a lemon so it cost 0. Buyer Price:50cents Good cars: sellers opt out Buyers opt out: no customers will come to the market. Neither seller nor buyer comes to the market. Create an institution for asymmetric information. India Story: rice dealers rip off buyers by making the kids put small pebbles to increase the weight of the rice. Competition by itself does not mean you will get a safe product. One of the results of competition is anonymity. Nobody is ever tagged; there is no necessity for repeat purchases. The problems of LDC is the anonymity....
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- Spring '11