Expected cheating risk can collapse markets entirely under asymmetric information.

Evidence

We know that the absence of trust in business has a devastating effect: a high expected probability of being cheated (of being saddled with a ‘lemon’) may lead to the non-emergence or even to the collapse of market exchange, especially in those cases where asymmetric information - concerning the quality of the goods exchanged - is relevant (Akerlof 1970; Dasgupta, this volume). — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2229

Categorization

• XREF: Directly connects to the reader’s Hardin/Luhmann analysis: trust requires observable constraints, and here the mafioso provides the observability substitute that lets exchange survive. — connects to: Successful cheaters can reverse selection so big weapons collapse; Compressed decision time makes financial markets prone to cascading collapse — David Harvey, The Condition of Postmodernity: An…, 1938
• DEFINE: Establishes ‘lemon’ and asymmetric-information as the precise terms grounding the analytical framework.
• corroborated: 2 independent passages support this claim — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2229

Broader Connections

• Successful cheaters can reverse selection so big weapons collapse #corroborates (0.90)