Writing the "The Market for 'Lemons'": A Personal and Interpretive Essay

I wrote "The Market for 'Lemons,'" (a 13-page paper for which I was awarded the Prize in Economics) during my first year as assistant professor at Berkeley, in 1966-67.* "Lemons" deals with a problem as old as markets themselves. It concerns how horse traders respond to the natural question: "if he wants to sell that horse, do I really want to buy it?" Such questioning is fundamental to the market for horses and used cars, but it is also at least minimally present in every market transaction.