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How The Internet, The Sharing Economy, And Reputational Feedback Mechanisms Solve The “Lemons Problem”, Adam Thierer, Christopher Koopman, Anne Hobson, Chris Kuiper

University of Miami Law Review

This paper argues that the sharing economy—through the use of the Internet and real time reputational feedback mechanisms—is providing a solution to the lemons problem that many regulators have spent decades attempting to overcome. Section I provides an overview of the sharing economy and traces its rapid growth. Section II revisits the lemons theory as well as the various regulatory solutions proposed to deal with the problem of asymmetric information. Section III discusses the relationship between reputation and trust and analyzes how reputational incentives affect commercial interactions. Section IV discusses how information asymmetries were addressed in the pre-Internet era. It …