Market for lemons in the Digital Age, unsolvable battle or a source of creativity?
Sources:
CNBC: Why Amazon Has A Fake Review Problem? https://www.youtube.com/watch?v=Mq_Ksga9uHY
Lin Yan: Game theory research on the “lemon” problem of the e-commerce market https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.1005.6447&rep=rep1&type=pdf
“Lemons”, originally a slang term for defective used cars, are items that have close to or is of zero value. These items, however, can potentially be sold on the market. The market for lemons refers to the idea that asymmetric information leads to a lower quality of goods. In such a market, the seller wants to sell all their items, good or bad, so they must present lemons as valuable products. The buyer does not know if the item being sold to them is truly good quality or bad. This asymmetric information leads to a complex market, a game where the best response for the seller is the action that gets them the highest price for the item. As Lin Yan explains in “The game Theory Research on the Lemon”, “in order to pursue the maximization of self-interest the seller conceals the true information”. The seller wants to reveal as little negative information about the product as possible: the more they deceive, the higher their payoff. Ultimately, it is a dominant strategy to deceive the buyer. “We assume that the seller gets a unit of positive income by being honest, and two units of income by being dishonest. So the optimal choice for the seller is deceiving”.
In today’s digital age, this strategy can be taken to a level that has never been done before. The “virtual character of network transactions makes it more difficult for the consumers to judge the average quality of the network products … the lack of quality information makes it hard for buyers to make an accurate judgment, which in turn enhances the uncertainty of the quality”. Ecommerce sites can now sell products with a range of quality, enticing the buyer with an extremely low price tag, constant advertising, and unrealistic product pictures. While some sites are an online version of a physical store such as Target and Walmart, the most popular eCommerce sites are ones that are completely online like Amazon and eBay. The sellers of these sites can easily manipulate the information the buyer receives. One popular way to do this is to control the reviews of their products. CNBC speaks about the pressing issue of fake reviews on Amazon, where sellers either post 1000s of fake 5-star reviews to entice buyers or buy profiles that already have a good reputation on the site. Both methods allow sellers to sell their lemons at the price of a good quality product. Not only is this market wasting the money of the buyer, but it creates an exhausting shopping experience; a constant search for a good quality product in a market full of lemons.
So what can the buyers do? In response to this complex market, there have formed at least three types of buyers, the ‘conscious buyer’, the ‘ultimate researcher’, and ‘the influencer’. Firstly, one can become a conscious buyer by being more aware of the environmental impact lemons are having on the planet. In order to combat that issue, one can shop locally and physically. Supporting local businesses, checking the origins of companies’ materials, and buying products based on the suggestions of one’s friends are ways to avoid buying lemons. Secondly, one can become an ultimate researcher. If you plan to buy products online, shop at eCommerce sites that have a physical location. When this is not possible, look for products that ironically have few reviews; such products are less likely to be lemons because their reviews are more likely to be those of real people. Look at reviews that include images and include specific details about the product, if most reviews for the item are generic it’s more likely to be a lemon. Lastly, some buyers use lemons as an opportunity to create entertaining content. Youtube, Instagram, and TikTok influencers rely on lemons to create fun content for users. Fast fashion sites that completely rely on social media for advertising create products that will be of good quality from a virtual perspective. Although they are not useful in the traditional sense, these products can be used to bring traffic to influencer’s social media accounts. Stores such as fashion nova and wish.com create products that are known to be lemons but are used for the sole purpose of gaining an online presence whether from pictures or video content. Wish.com has become infamous for selling lemons, to the point where it’s expected and almost accepted by its buyers. People take the chance at buying items from wish because the expectation matches its’ extremely low prices(sometimes $0). As an influencer, lemons aren’t seen as worthless, they are now as valuable as good quality items. ‘Clickbait titles’ such as ‘I bought all the free items off wish’ trend highly on social media. In the digital age, lemons are used to entertain millions merely for their lack of functionality.
The market of lemons is easily disguised in the digital age, such lemons can now be sold at a high price by masking themselves as a good quality item. As a result, buyers have found creative ways to maneuver this issue. Some buyers learn new methods to identify good quality products, while some intentionally use lemons in a non-traditional way. As we rely on eCommerce sites to buy basic goods, our opinions on lemons will continue to change. Will the idea of a lemon become obsolete, or will the world value sustainability over nontraditional trends?
Author: Sheba Sow