Game 05 · Market design
Lemon & Match
40 sellers, one buyer pool that can't see quality, only price. Set your certification floor and warranty policy, then run the market and watch whether it holds together or unravels to the bottom.
40 sellers, one buyer who can't see quality
Design the market before the lemons take over
Buyers only see the average quality on offer, not any one seller's true quality. Set your policy, then run ten rounds and watch who stays.
Sellers below this quality can't list at all.
Run the market to see quality play out over ten rounds.
Sellers · tap one
It is Akerlof's lemons problem
Buyers who can't verify quality pay the average price, which is a bad deal for good sellers and a great deal for bad ones. The good sellers leave first.
Two different fixes
A certification floor filters out low quality directly. A warranty is softer: it doesn't screen anyone, it just changes what the price signals.
Watch the unraveling
Adverse selection isn't gradual decline, it's a spiral. Once average quality drops, price drops, which pushes the next tier of sellers out too.