In 2001, George Akerlof won a Nobel Prize in economics for his theoretical work on what is commonly known as the market of lemons. This term applies to market exchanges where there is asymmetric information between buyers and sellers, and it is usually associated with the used car industry. In this business, buyers do no know which are the good cars, the bad cars and the trouble-causing lemons. Sellers, however, know their merchandise, and can lie about a car’s quality. According to Akerlof’s mathematical model, if less than two thirds are good cars only lemons will be sold. This causes buyers to assume that all cars are bad, and thus pay low prices. Although this theory has been used to study health insurance and the labor market, it can also be used to analyze issues of the prostitution industry in the U.S. Most people suppose that the only kind of woman who would sell sexual services at any price have poor quality. Since clients seeking sexual services do not know significant information about prostitutes, they assume that many of them are infected with STD’s and are uneducated marginalized women. From an economic perspective, they can be classified as lemons, and this might explain why so many consumers attribute them a low value.              According to Akerlof’s theory, equilibrium in the market for lemons is usually hard to break. One of the fundamental mechanisms for avoiding markets for lemons involves signaling quality. These are physical proofs that the products sold are actually worth buying, for instance documents that say “certified used car”. In the illegal prostitution industry, however, it is hard to provide documents indicating “certified used prostitute”, or “properly refurbished sex worker”. A recent article in The Economist describes how a prostitute named Andrea is working hard to enhance signaling quality in the prostitution industry, and combating the idea that prostitution is a market for lemons. First of all, she holds a university degree from a prestigious Canadian university. According to Nobel laureate Michael Spence, education gives an excellent signal of productivity, even if education itself has no direct effect on the worker’s productivity. This allows her to appear as an articulate, intelligent and skilled professional. In addition, she advertises herself in expensive guides and has a well organized website, where she shows pictures of herself wearing stylish and refined clothing. However, the most important and noticeable signal she gives are her prices, which start at $500 per hour. These prices signal that she is a high-quality product; clients feel more secure and are willing to pay more.            In an attempt by the government to avoid the market for lemons in the car industry, every state created what are known as lemon laws. Since prostitution is illegal in most states, this market is usually a victim of such phenomenon because most of the workers are not like Andrea. However, in Nevada, where prostitution is legal, the government and the Nevada Brothel Association have attempted to regulate and make this market accountable. In the book, Brothel: Mustang Ranch and Its Women, Alexa Albert describes how these brothels have been successful in taking prostitution out of the market of lemons. Her medical and sociological research indicates that becoming a licensed sex worker in Nevada involves a rigorous background check. Everyone applying to become a licensed brothel prostitute needs to be tested for HIV and other STD’s, and they are rejected if they test positive. Her main argument is that when it comes to prostitution and public health, the source of HIV and STD outbreaks is not to be found in legal brothels, thus opposing to the common view that this is a market full of “bad quality-products”. Whether prostitution in the U.S. is a market for lemons or a regulated industry, it certainly deals with human capital and there is always limited information about the product, giving both buyers and sellers a hard time finding equilibrium.The Economist Article: http://www.moreintelligentlife.com/story/prostitution-economicsOther References:Albert, Alexa. Brother: Mustang Ranch and its Women. Ballantine Books,  2002.     Easley, Kleinberg, David, John. Networks: Course Packet and Required Readings. Ithaca, NY: Cornell University.