Interactive used car market showing how a wider information gap makes the owners of the best cars walk away and the buyer offer fall
Paying the average price makes the best cars vanish
A buyer who cannot check a used car protects themselves by offering the average value of everything on sale. The owner of a genuinely good car refuses that offer and keeps it, so the average falls, the offer falls and the next-best cars walk too. Widen the information gap and watch which cars leave first and where the offer line settles.
Used car market
Gap 50%
Widen the gap. Watch the offer line and the top cars.
Offer $5.9k · 27/40 sell
Quality car ($8k–$20k)Lemon ($2k–$7k)Buyer offer = average on saleHeight = true worth · values illustrative
Information gap50%
Perfect information50%Complete asymmetry
Buyer offer
$5.9k
Quality cars on sale
7 of 20
Hidden-information problems
Know This
When sellers do not disclose what they know, buyers pay the average price, the best cars leave and the average falls again: that unravelling is adverse selection, a market failure that leaves quality goods underprovided.