Research On Lemons Under Asymmetric Information

Through describing the theory of asymmetric information, this paper shows that the happening of adverse selection results from the existence of private information in product markets, thus it will give rise to the problem of market transaction safety for quality quack. The effective solution to adverse selection is signaling. In order to give positive effectivity on signaling, this article suggests that it should establish the minimum quality standards and premium system of reputation firms at the same time, it also discusses in depth that if there are various market parts, how they will maintain their reputation and choose qualities.