Cyber ´Lemons´ Problem and Market Segments by E-Commerce

The e-commerce markets make it easier for buyers to purchase products from distant seller, but the lack of the conventional ways to assess the quality of a product may brings on the cyber ´lemons´ problem. This paper builds the equilibrium model between e-commerce and traditional marketplaces. This paper concludes that if ´lemons´ problem persists in both two marketplaces, a sub-optimal equilibrium with parallel market segments may arise. As soon as the cyber ´lemons´ reduce, the substitution of e-business market for traditional market will increase.