Not sure what the connection to “market for lemons” is.
People who haven’t gotten an education are, on average, unproductive, since productive people have a better alternative to not getting an education (namely, getting an education). Similarly, in a market for lemons, cars on the market are, on average, low-quality, since people with high-quality cars have a better alternative to putting them on an open market (namely, continuing to use the car, or selling it in a higher-trust market).
I agree that is still a Nash equilibrium and I think even a Perfect Bayesian Equilibrium, but there may be a stronger formal equilibrium concept that rules it out?
It’s possible, I don’t know the formal stronger equilibrium concepts though.
Now that I think about it, there are even simpler cases of more-available information making Nash equilibria worse. In any finite iterated prisoner’s dilemma with known horizon, the only Nash equilibrium is to always defect. But, in a finite iterated prisoner’s dilemma with unknown geometrically-distributed horizon (sufficiently far away in expectation), there are Nash equilibria that generate mutual cooperation (due to folk theorems).
People who haven’t gotten an education are, on average, unproductive, since productive people have a better alternative to not getting an education (namely, getting an education). Similarly, in a market for lemons, cars on the market are, on average, low-quality, since people with high-quality cars have a better alternative to putting them on an open market (namely, continuing to use the car, or selling it in a higher-trust market).
It’s possible, I don’t know the formal stronger equilibrium concepts though.
Now that I think about it, there are even simpler cases of more-available information making Nash equilibria worse. In any finite iterated prisoner’s dilemma with known horizon, the only Nash equilibrium is to always defect. But, in a finite iterated prisoner’s dilemma with unknown geometrically-distributed horizon (sufficiently far away in expectation), there are Nash equilibria that generate mutual cooperation (due to folk theorems).