Jawn Lam

George A. Akerlof

ThinkersBorn 1940Economist

Works

  • The Market for "Lemons": Quality Uncertainty and the Market Mechanism, Quarterly Journal of Economics, 1970

In Tactics of Organizational Politics

Ideas

Asymmetric information and adverse selection. When sellers know the quality of what they sell and buyers cannot tell, buyers will pay only for average quality, so owners of good goods withdraw and average quality falls. Using the used-car market as his example, Akerlof showed that such gaps in information can shrink a market and in the extreme make it collapse.

What it explains

Akerlof explains the power of whoever knows what the other side cannot check. In an organization, the unit that holds the facts about cost, risk, or performance sets the terms on which others must decide, and decision-makers who cannot verify claims discount all of them, honest ones included.

Tactics that draw on George A. Akerlof (94)

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