The Market for Lemons car. This, in turn, motivates the owners of moderately good cars not to sell, and so on. The result is that a market in which there is asymmetric information with respect to quality shows characteristics similar to those described by Gresham's Law: the bad drives out the good. (Although Gresham's principle applies more specifically to exchange rates, modified analogies can be drawn.) Akerlof considers a situation in which demand "D" for used cars depends on the cars price "p" and quality "µ" = "µ"("p") and the supply depends on price alone. Economic equilibrium is given by "S"("p") = "D"("p","µ") and
Herod's Law revolver and is told that the only law is Herod's law: literally translated: "either you get screwed or you get fucked" ("o te chingas o te jodes"). On his way back, he meets a caucasian American on the road when his car breaks down; the American looks under the hood, reconnects a wire and then asks Vargas for hundreds of dollars. He says that he is the mayor of San Pedro and that he is good for the money, then laughing it off as he drives away. Returning to the town, a bribe from Doña Lupe sets him on the