I found this blog on the Marginal Revolution that goes along quite well with our in-class discussion of asymmetric information. The idea is that because of asymmetric information you can’t sell a good used car for what it’s really worth. As a result, people with good used cars tend to hold on to them and the percentage of bad used cars on the market goes up. This blog points out one way to get around asymmetric information and why the used car industry doesn’t fail. In the blogger’s own words, “buyers and sellers use testing and certification to remove the most important information asymmetries.” In recent years I have seen lots of used car dealers advertise that they sell certified used car. Like in the experiment last week, the certification is a way of signaling that a car is not a lemon and worth a high price.