Asymmetric information in markets can cause all sorts of problems for buyers looking to find a good deal.  Lemons in the market for used cars decrease buyers’ willingness to pay premium prices and cause good cars not to be sold.  As it turns out, the market for lemons is recently having negative implications for the manufacturers of such cars as well.  Enacted in the 1980s, California’s lemon laws protect used car buyers from the perils of purchasing hazardous used cars.  Under these laws, buyers of such cars can receive refunds directly from manufacturers from used cars still under warranty.  Until now, the laws have worked smoothly.
Unfortunately, as mentioned this article, http://www.latimes.com/business/la-fi-lemonlaw9-2009may09,0,3217006.story , Chrysler’s recent bankruptcy has hindered their ability to make good on requested payments. Many buyers have pending requests of thousands of dollars, but it is unclear whether they will ever receive these payments.  In some situations, consumers have returned their vehicles and are still waiting for a refund check or replacement vehicle. In these cases, they are worse off than if they had simply purchased the lemon without seeking a refund. As this development shows, the market for lemons creates negative outcomes for more than just potential buyers and sellers in the used car market.  Not only do lemons in the market drive away quality products, but as is demonstrated by Chrysler, they also create complications in bankruptcy cases as well.