Is Online Marketplace a market of Lemon?
By david365
Nov 28, 2008 - 2:01:19 AM
2001 Nobel Prize winner George Akerlof is famous for his insights on Lemon Markets and his pioneering economic work using Asymmetrical Information Theory. The simplest definition of a Lemon Market is any market with high-quality and low-quality products or services where buyers have limited information about that quality. According to Akerlof, such markets become highly inefficient, favoring low-quality sellers and allowing low-quality products to dominate the market.
As we know, Fake products are more and more common in all industries and it appears not only in our real daily life but also on illusory internet. And fake products are low-cost, they were sold at a lower price than the name-brand products, So now we are wondering whether the market of lemon applies to online marketplace.
According to a research conducted by www.Baidu,com, Chinese fake products are so common that we can't tell an accurate number. And they are so similar to the real one that people always can't tell the fake one from the real one. According to the analysis, almost all famous brand watches which are sold in Korea are made in China, we can infer that fake product are the most common thing in China.
According to my editing experience on a B2B website, so many fake products flood on the website: Nike, Adidas, Sumsung and so on. Fake products flood in many industries and they are sold at a lower price and people can't get enough information to tell fake ones from real ones. That would cause the market of lemon.
It would be oversimplified to declare that this is the state of market of lemon and that's why there are so many marketing-bashers and apologists. The more pertinent point is this: uninformed markets are not good for buyers or for sellers who strive for best practices and high standard.So I think a market of lemon would exit if we take no actions to avoid it.
Then how could we avoid it:
Although in some categories fake products are frequent, I think that this is not a problem outside luxury goods. I would argue that the following factors will prevent online marketplace from becoming a market of lemons.
First, Feedback is a way for people to communicate and get information about sellers, while that's the leading reason why a market of lemon exits. As the buyers' lack of information about products and the fake products' low price, the market of lemon developes. In the era of information, people need communication to get enough information to judge things around them. In online marketplace, feedback just function as the bridge which links people with information together. So feedback is the most important way to reduce the dissymmetric information between sellers and buyers. Then reach the goal to reduce the market of lemon.
Second, detailed description of product is also a useful way to reduce problems caused by incomplete information and reassure buyers. Just like the stock market, people get complete information such as the company's economy condiction, productsĄŻ ability to compete from public media to decide whether the company is worthy to buy. People know complete information of product by detailed description of product to judge the real value of the product. I think it is an effective way to avoid fraud products.
Third, As a B2B market, we should provide a safer and more trustful space for our buyers. We should try our best to reduce fake products.
In a word, uninformed information and buyers' lack of information are the leading cause of lemon market. Information and understanding information is crucial if marketing is to avoid the pitfalls of Lemon Markets. Such information should make gradations in the quality spectrum more visible, giving buyers greater confidence that they are getting what they pay for and allowing sellers to make value a deeper part of what they offer and the price they charge.
