THE EFFICACY OF STATE MANDATED MINIMUM QUALITY CERTIFICATION: THE CASE OF USED VEHICLES

This paper investigates whether the quality certification required by certain state used vehicle disclosure laws has been effective. Metzger concluded from a theoretical investigation of non-market responses to the lemons problem, that such laws may or may not be effective. We have been unable to find evidence that the currently mandated disclosure requirements in Wisconsin (known defects provision) and Iowa (safety certification) are effective in increasing the number of good quality vehicles traded in those used markets. These disclosure requirements do not seem to decrease a prospective buyer's risk of purchasing a lemon.