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  • Adverse Selection Leading to Missing Markets

Missing Market due to Asymmetric Information

A missing market occurs when a potentially beneficial exchange fails to happen because of asymmetric or non-verifiable information. [1] Adverse selection is a key cause of such missing markets; for instance, in a 'lemons' market where buyers cannot assess quality, the information gap can cause the market to collapse entirely as no cars are offered for sale. [1]

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Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ

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