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One of the things I remember from taking game theory at college was that getting a good deal on a used car is near impossible. The seller has perfect informati
by steve19 17y ago
One of the things I remember from taking game theory at college was that getting a good deal on a used car is near impossible.
The seller has perfect information (knows all the flaws) and the buyer has imperfect information (only knows what information can be gathered from a test drive and superficial inspection).
- gojomo 17y agogetting a good deal on a used car is near impossible Theoretically, and as predicted by a classic paper by Economics Nobel-winner George Akerlof, yes. But practically, no. For various reasons the used-car market does not behave like the theory of asymmetric information predicts. Carried to its logical conclusion, the theory suggests the market won't exist at all -- and yet clearly it does! See the Wikipedia article for some discussion: http://en.wikipedia.org/wiki/The_Market_for_Lemons http://en.wikipedia.org/wiki/The_Market_for_Lemons From personal experience: I've bought a couple used cars -- and always gotten great value. My sister and other members of my family have had success as well. And plenty of personal-finance gurus will tell you that you should never buy a new car -- the premium over a reliable used-car is rarely justifiable, except on emotional/fashionable grounds.
- mattcottingham 17y ago"superficial inspection" It's quite easy to get a professionally accredited car inspection for used cars in the UK. It doesn't cost a lot, and it means the buyer regains complete bargaining power. Of course, it isn't economical to do this for very old cars, or for a lot of cars.