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The Robustness of Lemons in Experimental Markets

In: Experimental Law and Economics

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  • Blake Dunkle
  • R. Mark Isaac
  • Philip Solimine

Abstract

In this chapter, the authors conduct a robustness study for the classic experimental results of Lynch, Miller, Plott, and Porter (1986,1991). The authors find strong support for the original hypotheses in an updated experimental marketplace, consisting of dichotomous product qualities, non-binding signals of product quality, fixed seller identifiers, and an end-point design of deliberate ambiguity. The authors show that fixed identifiers alone are not sufficient devices to support efficient outcomes in these updated market conditions.

Suggested Citation

  • Blake Dunkle & R. Mark Isaac & Philip Solimine, 2022. "The Robustness of Lemons in Experimental Markets," Research in Experimental Economics, in: Experimental Law and Economics, volume 21, pages 201-216, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rexezz:s0193-230620220000021009
    DOI: 10.1108/S0193-230620220000021009
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    References listed on IDEAS

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    1. Gary E. Bolton & Elena Katok & Axel Ockenfels, 2004. "How Effective Are Electronic Reputation Mechanisms? An Experimental Investigation," Management Science, INFORMS, vol. 50(11), pages 1587-1602, November.
    2. Jordi Brandts & Gary Charness, 2004. "Do Labour Market Conditions Affect Gift Exchange? Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 114(497), pages 684-708, July.
    3. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    4. Bolton, Gary E. & Katok, Elena & Ockenfels, Axel, 2005. "Cooperation among strangers with limited information about reputation," Journal of Public Economics, Elsevier, vol. 89(8), pages 1457-1468, August.
    5. Seinen, Ingrid & Schram, Arthur, 2006. "Social status and group norms: Indirect reciprocity in a repeated helping experiment," European Economic Review, Elsevier, vol. 50(3), pages 581-602, April.
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    Cited by:

    1. Solimine, Philip & Isaac, R. Mark, 2023. "Reputation and market structure in experimental platforms," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 528-559.

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    More about this item

    Keywords

    Experimental markets; replication and robustness; consumer protection; lemons market; reputation; product quality;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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