MEREL Pierre, ORTIZ-BOBEA Ariel & PAROISSIEN Emmanuel, "How big is the ‘‘lemons’’ problem? Historical evidence from FrenchHow big is the ‘‘lemons’’ problem? Historical evidence from Frenchwines", in European Economic Review, vol. 138, September 2021.
This paper provides empirical evidence on the welfare losses associated with asymmetric information about product quality in a competitive market. When consumers cannot observe product characteristics at the time of purchase, atomistic producers have no incentive to supply costly quality. We compare wine prices across administrative districts around the enactment of historic regulations aimed at certifying the quality of more than 250 French appellation wines to identify welfare losses from asymmetric information.
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