Businesses with a reputation for honest dealing and good quality attract repeat business.
Why are you so pessimistic that customers can't go anywhere else?
The classic market for lemons example is about used cars. People can just not buy used cars, eg by buying only new cars. But a dealer with a reputation for honesty can still sell used cars, even if the customer will only learn whether there's a lemon later.
Another solution is to use insurance, or third party inspectors.
> People can just not buy used cars, eg by buying only new cars.
Listen to yourself here. Your solution is "be rich"
So what happens is you either create a cliff or you pull everything down too. Lemon markets for the poor or lemon markets for everyone. Neither is good
> Listen to yourself here. Your solution is "be rich"
I never bought a used car, or any car at all. And I did that before I was rich.
In fact, poor people generally can't afford cars in the first place.
> So what happens is you either create a cliff or you pull everything down too. Lemon markets for the poor or lemon markets for everyone. Neither is good
Huh, what? Reputation still works, even for poor customers. And so do warranties and insurances.
And you seem to imply that regulation can magically make the problem go away? It can't. Typically, regulation in this case raises the prices for everyone by demanding certain features, whether users want them or not. (But details depend on exactly what regulation you propose.)
> In fact, poor people generally can't afford cars in the first place.
I bought a car when I was poor. It was $2k. Why? Because if I didn't buy a car a 20 minute drive to work was a 2hr bus ride. You will, in fact, find that lots of people buy cheap cars. Go look at how many cars exist at used car lots or even your local Craigslist. You think those are just listings and no one is every buying?
> Huh, what? Reputation still works
You misunderstand. Apple and Google have reputations but their products still have a lot of shit.
> And you seem to imply that regulation can magically make the problem go away?
Never claimed this. Don't put words in my mouth. Which you seem to have this all figured out. I suggest you write a paper. Go win your Nobel prize. ¯\_(ツ)_/¯
Why are you so pessimistic that customers can't go anywhere else?
The classic market for lemons example is about used cars. People can just not buy used cars, eg by buying only new cars. But a dealer with a reputation for honesty can still sell used cars, even if the customer will only learn whether there's a lemon later.
Another solution is to use insurance, or third party inspectors.