ABSTRACT
In a market economy, if anomalies like the well-known lemon problem described by Levitt and Dubner occur, they inevitably create a fi nancial incentive for entrepreneurs to solve them.2 Suppose you buy a car for $20,000 and decide for whatever reason to resell it quickly. Assuming nothing is wrong with the car, you have a $20,000 car with just a few miles on it, but according to Levitt and Dubner you can only sell it for $15,000 because buyers believe that people only try to sell a new car so quickly when there’s something seriously wrong with it. What do you do? Do you really sell the car for a $5,000 loss?
