This seminal paper by George Akerlof is elegant and easy to read. The style of the paper is very different from Fama's paper on the EMH.
Akerlof starts with a mundane question: why are used cars are so much cheaper than new cars? As this is a course about the Economics of Information (Technology), you can guess the answer -- something about information? There are good cars (cherries) and bad cars (lemons), and some of the participants in the market have more information than others .. please read the paper for the full answer.
The history of this paper is very interesting. It was rejected for its 'triviality' by both the American Economic Review and the review of Economic Studies. It was rejected for being incorrect by the reviewers from the Journal of Political Economy.
It turns out that this is one the most cited papers in Economics, it is one of the first works to study markets with asymmetric information and it is the one paper mentioned by the Noble Prize committee when they announced Akerlof's prize ... what a trivial paper!
A nice question for the exam may be about the Tax problems of Henry VIII. He replaced almost half of the silver in coins with base metals, to increase the government's income without raising taxes. Merchants knew that and saved the old pure silver shillings while circulating the bad ones. Namely bad money drove out good money and this has become to be known as Gresham's law. Is this story the same as Akerlof's story about cars and lemons? The answer is in the paper.
