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Nobel prize for used car theory

A theory analysing why people distrust used car salesmen has helped three Americans take the 2001 Nobel economics prize.

Economics professors George Akerlof, Michael Spence and Joseph Stiglitz assessed how markets functioned when some people knew more than others – a concept termed asymmetric information.

They believed the theory was behind many people's distrust of used car salesmen, who usually know far more than buyers about the vehicles.

Better informed individuals, though, could avoid problems associated with adverse selection. This was happening with the growth in dotcom companies who gave customers access to information about cars online.

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