Comment by skeptic_ai

Problem 1: Buyers cannot tell if a product is good or bad, so they offer less money and good sellers may leave.

Suppose 50% of used laptops are good and worth $1,000, while 50% are bad and worth $400. Since you cannot tell which one you are buying, the average value is 0.5x1000 + 0.5x400 = $700, so you will not want to pay more than about $700.

But owners of good laptops may refuse to sell for $700, so more good laptops leave the market and the chance of buying a bad one increases. And the only guy selling for $700 is the lemons.

Problem 2: The theory assumes buyers already know how many bad products are in the market, but in real life they often do not.

Its obvious this market for lemons can’t be true