The lemons problem refers to a situation in which the quality of a product is uncertain and asymmetrically known between buyers and sellers. This concept, introduced by economist George Akerlof, illustrates how markets can fail due to the presence of low-quality goods ('lemons') that drive out high-quality goods from the market, leading to adverse selection. The implications of this problem can be observed in various markets, particularly in insurance and labor, where information asymmetry affects decision-making and market efficiency.
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