University News

Having a Nice Glass of French Wine?

From UC Davis News

If consumers cannot tell the quality of a product when they buy it, it can drive high-quality products, like a good French wine, out of the market. Consumers would not pay a premium, and producers would have no incentive to make costly quality improvements. This widely held economic tenet, formalized in a famed article by Nobel Prize-winner George Akerlof, suggests that without standards, consumers could be left with mostly “lemons,” such as defective used cars.