Wednesday, December 28, 2005


During my reading i came across a new term and also a whole new dimension to economic history. Thought of sharing it.
The new economic history in which quantitative techniques including econometrics are used to make interpretations and reconstructions of the past. It was pioneered by Robert William Fogel and Douglass C North.

Friday, December 23, 2005

Lemon problem

This problem was noted byAkerlof in 1970. A popular example of the phenomenon is in the secondhand car market, where sellers know whether or nor their car is a lemon (i.e perform badly), but where buyers cannot make that judgement without running the car. Given that buyers can't tell the quality of the car they are buying, all cars of the same model will end up selling at the same price, regardless of whether they rae lemons or not. But the risk of purchasing a lemon will lower the price buyers are prepared to pay for any car and, because secondhand prices are low, people with non-lemon cars will be little inclined to put them on the market.
This problem is commonly referred to as an adverse selection.