Archived posting to the Leica Users Group, 2000/08/18

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Subject: [Leica] [OT] Market for Lemons (was: R reliability)
From: Maestro Logos <maestro_logos@mac.com>
Date: Fri, 18 Aug 2000 12:01:04 -0700

> From: telyt560@cswebmail.com
> Reply-To: leica-users@mejac.palo-alto.ca.us
> Date: 18 Aug 2000 11:14:58 -0700
> To: leica-users@mejac.palo-alto.ca.us
> Subject: R reliability (was: Re: [Leica] Re: Re: Why M is so popular?)
> 
> Miro's problems are with used R-bodies.  IMHO Solms has nothing to do with the
> problems he's had.  When buying used equipment the seller's knowledge of the
> product's condition and the seller's willingness to be honest with the buyer
> is as important as the camera's specs and features.

You've raised an important point. In elementary economics, there is a
concept called "the market for lemons". In short, economists note that there
is "information asymmetry"--namely, the seller knows more about the
equipment he/she is selling than the buyer. When the seller doesn't bear
fully the consequences of selling a lemon (i.e. the seller is not required
to provide a full warranty), the information asymmetry leads to "moral
hazard". This may sound intuitive, but using some simple mathematics, it can
be formally shown that there would be more lemons than not. In other words,
one is more likely to encounter reliability problems with used equipment
than with brand new gear.

You might not have noticed it, but in your reply above you have implicitly
noted the economic concepts of "information asymmetry" and "incentives to
moral hazard".  

Regards,

Logos 

Replies: Reply from Mark Rabiner <mark@rabiner.cncoffice.com> (Re: [Leica] [OT] Market for Lemons (was: R reliability))