In the market for karate lessons, the instructors know more about the quality of their instruction than their students do. This situation may set up a:
A) lemons problem.
B) sensei equilibrium.
C) subgame outcome.
D) dojo fruition.

Question

Quizplus · Accepted Answer

This situation is an example of a "lemons problem," where there is asymmetric information between buyers and sellers, leading to potential market inefficiency. In this case, instructors (sellers) have more information about the quality of their lessons than students (buyers), which can lead to adverse selection and a market for low-quality services.

In the Market for Karate Lessons, the Instructors Know More